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 A large tax refund may feel like free money, but it isn't. As of March 17, the Internal Revenue Service has issued 62.5 million refunds, averaging out to $2,931. The federal agency expects to receive more than 153 million tax returns this season. Don't celebrate that giant tax refund Don't celebrate that giant tax refund Many tax refund recipients are putting that money to work. About a third of taxpayers getting a refund expect to save or invest the money, while nearly three in 10 will pay down debt, according to Bankrate.com. Here's the bad news: If the IRS sends you a huge check this spring, it means you've likely overpaid on taxes throughout the year. "A large refund from the IRS may seem like an advantage, but it isn't the best or most effective use of your cash flow," said Tim Steffen, director of financial planning at Robert W. Baird & Co. "You're basically giving the IRS an interest-free loan," he said. Know your withholding If you're an employee, your employer gave you a Form W-4 when you were hired, which you can adjust to make sure the right amount of income tax is withheld from your paycheck. {ad} On the form, you'll make note of your spouse, your dependents and your filing status; these are your "personal allowances." The more allowances you have, the less tax will be withheld. "Some people read the form and think, 'I'm married and have three kids,'" said Cari Weston, director of tax practice and ethics at the American Institute of CPAs. "They end up with five allowances and owe substantial taxes at the end of the year." The IRS has a calculator to help you figure out the correct withholding. Overtaxed or undertaxed The safest course to avoid owing a large amount at tax time is to fill out your W-4 as "single" or "married but withhold at higher single rate" and take no personal allowances. However, this may also set you up for having excess taxes withheld throughout the year — leading to that large refund in the spring. "Psychologically, it's not a terrible thing to have a little bit of a refund," said Jeffrey Levine, chief retirement strategist at Ed Slott and Co. in Rockville Centre, New York. "But if you overpay throughout the year, it's not the right move." Here's how to evaluate your withholding and make sure it's just right for you. Review your W-4: Striking a balance for withholding will be based on your salary, your spouse's earnings, the tax bracket you're in and the deductions you take. If you decide to withhold less for taxes, be smart with your money. "Contribute to a dependent care plan at work," said Weston. "If you have a high-deductible medical plan, set aside some money into your health savings account." Compare your tax returns: How did your tax load shape up last year, and how does it compare to this year? "Unless you've had a major change in your life, your deductions are similar year to year," said Levine. "If your effective tax rate was 20 percent on average last year, check your allowances to make sure you're close to 20 percent now," he said. Talk to your accountant: The right amount of tax to withhold will vary from one family to the next. For example, if you are a high earner and have no mortgage and no kids, it might make sense to withhold more for taxes. Conversely, a working couple earning less than $100,000 with three kids and a mortgage may be able to withhold less, due to the credits and deductions they can take. "If you've deliberately underpaid, the money should go someplace safe because this is a really short time horizon." {ad} Calculating your withholding is complicated if you have multiple sources of income: distributions from retirement accounts or cash from a rental property. You'll need to make estimated quarterly tax payments in those cases, Steffen said. "Work with a CPA to do a projection and figure out what your tax liability will be at the end of the year," he said. "In a perfect scenario, you'll have a balance due when you file your return, but not one that's large enough to create a penalty." Avoid tax arbitrage: If you withhold less in taxes because you have bigger plans with your paycheck, bear in mind that you'll owe Uncle Sam next year. Don't gamble your cash. "Some people do foolish things: 'If I invest the money and make 7 percent this year, and I beat the IRS' penalty, then I'm ahead,'" said Levine. "If you've deliberately underpaid, the money should go someplace safe because this is a really short time horizon," he said.
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Lakhs of duplicate PAN cards in Madhya Pradesh
October, 25th 2006
Last year, all offices of the Income Tax Department were networked and a different software used to network them.
 
The D-PAN software enabled the department found some people in Indore who have been issued PAN cards more than once. Such cases were detected not just in Indore but also in Bhopal and other places too.
 
Now, the department has issued notices to such people who have been issued multiple PAN cards to deposit their duplicate cards with the authorities concerned failing which the card holders concerned will have to pay a fine of Rs 10,000.
 
PAN card issue system introduced by the Income Tax Department in 1998, had a photograph of the Income Tax payee. The cards were earlier issued from Mumbai, hence it took a long time for it to be issued.
 
Meanwhile, the applicants often sent reminders for the PAN cards. From 2001 the cards were issued locally, and the applicants needed to submit their applications to the local office of the department.
 
Those who could not get the cards from Mumbai office, tried to obtain them immediately from the local office as it was mandatory to quote PAN on the IT return forms from 2003. The local office issued PAN cards swiftly.
 
Meanwhile, the Mumbai office too issued cards on the basis of the earlier applications and thus most taxpayers ended up with two cards.
 
According to rules framed recently, a taxpayer must have only one PAN card. In Madhya Pradesh and Chhattisgarh, there are 2.8 lakh taxpayers possessing two PAN cards most of them are residents of Indore, Bhopal, Raipur and other big cities.
 
The number of taxpayers of Madhya Pradesh and Chhattisgarh who have been issued PAN cards number around 25 lakh.
 
The local office at Indore has refused to divulge the information on the number of taxpayers with double cards though the last date for cancellation of the extra card has been fixed as December 31. After this date, the formula of one man one card will be enforced.
 
At present, around 13 lakh taxpayers across the country have more than one card. The department started issuing notices to those with extra cards, requesting them to send the cards by post if it was inconvenient for them to reach the Income Tax offices personally.
 
 
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