Are You Getting a Tax Refund?

I read quite a bit of interesting discussion on moneyning in the last 24 hours. There seems to be two schools of thought on getting a refund: on one hand, it is your money, not the governments, so if you get a big refund from Uncle Sam each year, that equates to an interest-free loan to the government. On the other hand, some tend to use the refund as their way of saving money.

Because I have been burned by taxes in the past, I fall into the second category.

I may revisit that strategy. Because of my past, I mentally would much rather overpay on my taxes and get a refund than to owe ONE SINGLE DIME. With proper planning, I know that I can tweak my withholding so that we will get little or nothing back. Right now, that would equate to an extra $50-100 a week that could be used to pay down my remaining debt. The thing is that my wife and I have managed to set aside a decent emergency fund, but it isn't nearly enough.

What do you think? Let me know.

Have a GREAT day!

Only 11 Months Until Taxes Are Due

Most people have a major anxiety attack when they thick about income taxes and those taxes are due each an every year on April 15 (unless the 15th falls on a weekend or that rare occasion in which it falls on Patriot's Day, a holiday that is celebrated in the Northeast but is rarely even mentioned in other regions of the country. The problem with April 15th is that people are rarely prepared for it.

It doesn't have to be that way.

If you hate owing taxes each and every year, you can plan your withholding to where you may actually get money back each year. If you are a do-it-yourself type of tax preparer, even software such as Turbotax or Taxcut offer a section on withholding support. You can always get advise from the IRS. You can actually change your withholding allowances from your employer (some larger employers offer that online and you can quickly and easily change your W-4.

When I worked for H&R Block, I even ran across people who owed several thousand dollars each year and were happy about it. That type of person was a very disciplined person who knew how much of his money he/she would owe back to Uncle Sam at the deadline and they used all the extra money (because they manipulated the system to have no money withheld and they had the maximum paycheck each week) to invest and make back more money than they would owe come April 15th. Unfortunately, most of us are not that disciplined.

If you like getting a large refund each year, you can plan for that. If, on the other hand, you would rather have a little bit larger check each month and have extra money to help you eliminate you credit card debt, you can do that as well. If you are having difficulties understanding how the whole tax code thing comes together, you can always consult with a tax professional to get the advice that you need.

But ultimately remember that it is your money and the government isn't giving you money when you get a refund, it just means that you paid too much of your money to the government interest-free. Keep up the excellent job that you have been doing to have more money for your life (and thank you for the tips that you have shared with me!). Have a GREAT day!