Each year about 70% of taxpayers look forward to getting a tax refund from the IRS. But do you really want a tax refund?
Consider this: a tax refund is actually extra money that you lent to Uncle Sam during the course of the year. Imagine what you could have done with that extra money? Instead of an expected refund, you could adjust the automatic withholding with your employer to increase your take-home pay.
This year the average tax refund is expected to be a bit more than $2100 and that’s about $40 a week. What would you do with that $40 a week?
You could put it in a savings account or use it to pay down credit cards. You could use it towards a night at the movies or maybe a manicure. Ideally, you could make regular contributions to an IRA which might lower your next tax bill.
If your employer offers a savings or 401k plan it becomes easier to lower your IRS withholding and automatically fund your savings or retirement option.
Getting a refund can also be viewed as forced savings and there’s nothing wrong with getting a “surprise payment” from the IRS once a year.
Just remember that a tax refund is your money. Then decide what’s the best way to get that money — week after week or in a lump sum.
Talk it over with your family or with an appropriate financial pro. Find out what plans your employer might offer. Some big employers offer employee stock ownership plans.
Remember, if you have unfiled tax returns Legal Tax Defense can help you file them and you might find you are owed money from those previous years. Don’t delay too long because after a while the IRS doesn’t have to pay you unclaimed refunds.
Disclaimer: Alan Mendelson is a well-known TV consumer news reporter who reports on tax issues. You should seek professional advice if you have tax questions or issues.