You need to be careful adjusting your withholding, because if you don’t have enough withheld through the year you may be subject to penalties which would more than negate any benefits you would get.

But maybe those penalties are what Jim was referring to by “recent laws have made numerous “rules of thumb” obsolete.” Do you have any clarification on this for us, Jim?

Actually, that’s what the IOUs are anyway, so what was I thinking??? Still I’d zero out state withholding just to be on the safe side.

Also in response to Kevin’s comment about the states not able to print and borrow money like the feds. I believe California has created a loophole. As you mentioned they are issuing IOU’s instead of money. I have also read that B of A has agreed to honor the IOU’s. Well, haven’t we given B of A billions of taxpayer dollars?

Hmm, so the front door was locked, lets try the back door. The whole thing is a scam. Nobody learned anything. California is getting a bailout by doing an end run.

The other thing I heard yesterday was that State employees cannot be paid with the IOU’s. So the people responsible for this mess are still getting paid. Great system!

Maybe i will owe $500, maybe i will owe $2000. With so many part time jobs and each being so flexible, i would rather have the cash now and pay it later.

A quick look at your states budget should tell you if yours could be one. States can’t print and borrow to pay obligations like the Fed can, so they’ll look for creative ways to conserve cash. Yesterday Calif announced it’ll be using vouchers. Better to owe a little on the state than to build up a big refund.

On the Federal, I’d have to say I lean in favor of what Yohbee wrote, that having a refund is like paying yourself first (forced savings). For some reason we’re better at paying bills (including monthly credit cards) than at putting money into an emergency fund. Having it arrive in the mail may be the best way for a lot of people. Then you have a choice to put it into savings or to pay down or payoff a credit card, which some how is more gratifying than paying it off over time.

I know I could have easily withheld her taxes from my paycheck, but we’ve never paid ES taxes before, so it’s basically an (non-too-pleasant) experience for us.

According to my calculations at our current pace we should be on target if everything we set up at the beginning of the year remains the same. However it never remains the same, we always end up with more deductions than we originally planned for… also it doesn’t help that congress waits until the last possible moment to tell us what new deductions are included or excluded.