How much interest is the government accruing off of our tax dollars as we have tax dollars withheld per paycheck?

Answer 1

As you may have heard, the government is borrowing massive amounts of money. It is paying massive amounts of interest, it is not earning any interest.

At best, you can say that the government is avoiding paying some interest rather than accruing interest. The current interest rate on one year Treasury Bills is 0.55% per year. So to the extent that the government managed to avoid having to issue an extra T-Bill, it is saving 55 cents per $100 per year.

Do you get a large refund at the end of the year? Do you realize it is not mandatory? You could have less withheld from each paycheck. You'd get a larger paycheck each week and a smaller refund at the end of the year. You can then put that extra money in the bank and earn interest yourself.

Go to your employer's payroll or HR department. Ask for a Form W-4. Fill it out. Use the following calculator to help you fill it out:

http://www.irs.gov/individuals/article/0,,id=96196,00.html

Many people mistakenly believe they are supposed to put down the number of exemptions or dependents they claim at the end of the year on their W-4. They end up having way too much withheld. You put "withholding allowances" down on the W-4, not exemptions or dependents. For many people, this is much larger than the number of exemptions they claim at the end of the year. As long as you don't end up owing more than $1000 at the end of the year, there will be no penalty. If you are getting Earned Income Credits (EIC), also ask your employer for Form W-5. Fill this out and your employer will pay you a bit of your EIC in each paycheck instead of in one big lump sum when you file your taxes.