Every year, I have a bet with my accountant. The bet is on whether or not I get a tax refund. If I have to pay on April 15, then I buy lunch. If I get a tax refund, he has to buy lunch. Since my accountant doesn’t like to have to buy me lunch, he wants to make sure that I don’t get a tax refund. Since it’s in my best interest to make sure that I don’t get a tax refund, I don’t mind buying lunch. Let’s talk about why receiving a tax refund isn’t in your best interest.
The American Way
Isn’t it the American way to get a tax refund? No. Why would anyone want to allow the federal or state government to hold on to their money, interest-free, instead of keeping that money for themselves and using it for what they want to use it for? It doesn’t make much sense to me but many Americans do it. Wouldn’t it be smarter to give a little less money to the government every month and keep that money for yourself?
There are times that you may not be able to avoid a refund, especially if you don’t have much income and have various credits available to you such as education tax credits or child tax credits. For the majority of us, however, it is possible to avoid getting a tax refund.
When April 15 hits…
So, when you go to pick up your taxes, if you have to pay on April 15, give your accountant a pat on the back. If you are getting a refund, ask him or her how you can avoid getting a refund in the future. It may be as simple as increasing the number of allowances on your paycheck or reducing the amount of estimated taxes that you pay (if you pay estimated taxes). If you do your taxes on your own, take the time to do a little calculating to see if you can eliminate your refund.