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home | Credit Mgr's Letter | The W-4 - A Source for Debt Payments . . .
 

The W-4 - A Source for Debt Payments?

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Most consumers know that they can avoid owing taxes each April 15 by adjusting their W-4 form. By adjusting their withholding, most consumers can ensure that enough taxes are taken out each pay period so that no additional payment is necessary at filing time.

However, some consumers have more money than necessary withheld. Many say they like to have the larger refund check in the spring. They consider it a kind of savings plan. But consumers with debt problems should consider using that extra withholding money to pay down their debts instead.

"Consumers should not have more money than necessary withheld each pay period, even though a large refund check seems like a good thing," says Durant Abernethy, president of the National Foundation for Consumer Credit. The foundation is the nonprofit umbrella organization for the more than 1,100 Consumer Credit Counseling Service (CCCS) offices nationwide.

"Wise money managers apply that extra money each payday throughout the year toward a savings or investment account or they use it to retire debt."

If you are searching for ways to get payment from a debtor, suggest the person review his or her withholding. The extra five dollars a week that goes toward that large refund check each year, could mean twenty dollars a month to pay down a debt owed to you instead. Explain that a large check next year won't mean much if the person is in serious debt when the check arrives.

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If a customer tells you that he or she is still paying off this year's tax debts and so cannot afford to pay you what is owed, consider referring the customer to CCCS. Internal Revenue Service officials have authorized CCCS counselors to work out installment plans for delinquent federal income taxes, enabling counselors to work out installment plans for delinquent federal income taxes. This will allow consumers to pay the taxes they owe over a period of time and make it part of a complete debt-reduction plan.

For the telephone number of the CCCS office nearest you, consult the business pages of the local directory under "Consumer Credit Counseling Service," or from a touch-tone phone dial 1-800-388-CCCS (2227).

Editor's Note: This article originally appeared in the Credit & Collection Manager's Letter.


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