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If you have a sizable refund of your 2012 taxes, it may be time for you to check your withholding. After all, when you overpay your taxes, youâ€™re making an interest-free loan to the government.
Reducing your withholding is as simple as filing a new Form W-4 with your employer. The form comes with a worksheet to figure out how many allowances you should claim. Donâ€™t forget to allow for other taxable income besides wages, such as dividends or investment gains.
If youâ€™re concerned about underpaying taxes and exposing yourself to penalties, there are a few rules you should know. Generally, you wonâ€™t face a penalty if you pay for 2013, through withholding or quarterly estimated payments, at least 100% of your 2012 taxes (110% if your adjusted gross income is over $150,000), or if you pay at least 90% of what youâ€™ll owe for 2013.
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