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.”1
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 (1800-829-1040) at www.irs.gov 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, www.paycheckcity.com 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-peryear 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
1
Taxation Quotations, Atlanta Journal-Constitution, April 11, 2004.
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)
Salary:
Federal Tax Bracket of 25%:
State Tax Bracket of 6%:
Total:
$5,000 in savings
spending accounts:
or
flexible
Total:
Federal Tax Bracket of 25%:
State Tax Bracket of 6%:
Net take-home income after
taxes and savings or flex
accounts:
Total taxes paid:
$50,000
-$12,500 ($50,000 x 25%)
-$ 3,000 ($50,000 x 6%)
$34,500
-$ 5,000 (after tax)
Before Tax
Employee #2 (Takes advantage
of pretax savings or flexible
spending accounts)
$50,000
-$ 5,000 (before tax)
$29,500
$45,000
-$11,250 ($45,000 x 25%)
-$ 2,700 ($45,000 x 6%)
$31,050
$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 governmentapproved incentives to increase your savings, decrease your taxes, and increase your
disposable income.
This article is adapted from Making Money Work: A Christian Guide For Personal
Finance with permission of Willie Glenn Page, Inc.  2005.
Making Money Work strives to provide the absolute finest in Christian personal finance
education. “Making Money Work: A Christian Guide For Personal Finance” is a book
based on Biblical principles that comes with a CD-ROM that has over 90 financial
calculators. In addition, we have a CD-RW workbook for people who would like to use
Making Money Work as a personal finance course. Please visit our website at
http://www.makingmoneywork.us/.