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Personal Finance


Tax Windfalls You Can Count On

By Bill G. Page
Author Representatives of the lawyers and chief priests asked Jesus, “ Are we or are we not permitted to pay taxes to the Roman Emperor?”—Luke 20:22. Jesus replied, “ Show me a silver piece. Whose head does it bear, and whose inscription? ‘Caesar’s,’ they replied. ‘Very well then,' he said, ‘pay Caesar what is due to Caesar, and pay God what is due to God ”—Luke 20:23–25. Jesus acknowledged the importance of paying taxes.

Taxes support our road systems, infrastructure, education, law enforcement, and many other important public services. Note that Jesus told the representatives to pay Caesar what is “due” to Caesar—not more and not less, but what is “due.” Franklin D. Roosevelt said, “Taxes, after all, are the dues that we pay for the privileges of membership in an organized society.”

If you are receiving a large refund from your tax filing for the end of the year, you have been overpaying your taxes throughout the year. That means the government has been using your money interest-free since collecting the tax. On the other hand, if you have been paying a large amount in taxes upon completing your tax return for the end of the year, you have not been paying the government enough taxes.

The ideal situation is that the taxpayer should only owe the government a few hundred dollars at the end of the year. That way, you owe the government interest-free and have until midnight on April 15 to pay off the tax bills. To adjust your tax withholding to more accurately reflect what is due to the government, ask your payroll department to help work out a more accurate estimate of your tax withholdings. You may also contact the Internal Revenue Service (1-800-829-1040) at to download forms, publications, instructions, and frequently asked questions. IRS Publication 919 “How Do I Adjust My Tax Withholding?” is the form you’ll need. In addition, is a website that has numerous calculators that deal with your paycheck, including determining withholding, links to withholding forms, and more.

While paying taxes is important for the government programs that benefit all citizens, you are wise to take advantage of the legally approved tax tactics that can lower your tax bills on a before-tax versus an after-tax basis. Your adjusted gross income can be adjusted by thousands of dollars per year by taking advantage of government approved programs such as employer savings plans that use pretax dollars or flexible spending accounts. Some employers offer flexible spending arrangements during a one-time-per-year sign-up period. Under flexible spending arrangements for services such as child care or elder care, employees can designate a portion of their salary to be deducted from their paychecks and deposited into a flexible spending account. Employees then draw on the account during the year to pay eligible expenses. Any salary set aside in the flexible spending account escapes income tax and Social Security tax. Once you sign up for the account, you cannot change the amount of your deductions from your paycheck unless you have some change in family status such as a divorce. It is important to accurately estimate the amount of money you will deposit into the account because any unused funds will be forfeited at year-end. This “use it or loose it” rule necessitates a conservative estimate on how much you think you will spend from the account in the coming year. Dependent care flexible spending accounts can be fairly well estimated based on last year’s day care charges.

Setting aside a portion of your pretax income has a substantial effect on your taxes. For example, note the following hypothetical example of Employee #1 who does not take advantage of pretax savings or flexible spending accounts versus Employee #2 who does take advantage of pretax savings or flexible spending accounts:



After Tax

Employee #1 (No pretax advantages)

Before Tax

Employee #2 (Takes advantage of pretax savings or flexible spending accounts)




Federal Tax Bracket of 25%:

-$12,500 ($50,000 x 25%)


State Tax Bracket of 6%:

-$ 3,000 ($50,000 x 6%)





$5,000 in savings or flexible spending accounts:

-$ 5,000 (after tax)

-$ 5,000 (before tax)




Federal Tax Bracket of 25%:


-$11,250 ($45,000 x 25%)

State Tax Bracket of 6%:


-$ 2,700 ($45,000 x 6%)

Net take-home income after taxes and savings or flex accounts:



Total taxes paid:

$15,500 ($12,500 + $3,000)

$13,950 ($11,250 + $2,700)

Note that Employee #2, who took advantage of the government’s before-tax savings or flexible spending account tax advantages, saved $1,550 in taxes ($15,500 - $13,950 = $1,550) and had $1,550 more net take-home income ($29,500 - $31,050 = $1,550).

Before-tax savings accounts and flexible spending accounts are great government-approved incentives to increase your savings, decrease your taxes, and increase your disposable income.


I have a new book/CD ROM called Making Money Work: A Christian Guide For Personal Finance (order online at or request it through your local Christian bookstore). It includes a wealth of information on personal finance and strategies. The book comes with a CD ROM that has calculators to help you analyze, plan and achieve your financial goals.


This article is adapted from Making Money Work: A Christian Guide For Personal Finance with permission of Willie Glenn Page, Inc. Ó 2005.


Taxation Quotations, Atlanta Journal-Constitution, April 11, 2004.



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