| This topic has been on my mind for a while. Is it better | | | | avoid lending money for free. If a taxpayer normally |
| to receive a large tax return or a small one? Many | | | | gets back $10,000 in a refund, they are missing out on |
| people love tax season because it is usually a chance | | | | using this money throughout the year. $833 of income |
| for them to get an infusion of cash. They may use this | | | | every month is being invested with the government |
| money to buy a large ticket item, do repairs around the | | | | with no return of interest. So my client is on the safe |
| house, pay off some bills, etc. This is more of a | | | | side, I would advise them to redo their form W-4. They |
| personal choice for most people. Let's explore the | | | | can get this directly from their employer. I would work |
| reasons why large refunds are good or not. | | | | with them to get deductions down so they are taking |
| I have tax clients that love when I tell them they are | | | | out maybe $633 or so less than they currently are. |
| getting a refund of $10,000. I cringe when I see refunds | | | | This leaves them with $200 being taken out of their |
| that large. These are usually the same people that | | | | check. The refund would be around $2400 at this point. |
| complain they have no money month to month to take | | | | They would be able to either put the difference in a |
| care of bills. This kind of situation happens, in my | | | | retirement plan or simply deposit in an interest bearing |
| opinion for two reasons, either the taxpayer has no | | | | account that they can use whenever they feel like |
| knowledge of how to change this, or they simply don't | | | | using it. |
| think they have the discipline to save the additional | | | | Whichever tax planning strategy a taxpayer chooses |
| money. Most people will fall into the latter. They think | | | | is a personal decision. I hope this article serves to give |
| that if the money is not seen by them, they won't miss | | | | some taxpayers some insight on why large refunds |
| it. They view this as a savings plan. | | | | may not be the best thing. A little discipline and planning |
| Let's take an example of how I would advise a client | | | | can go a long way to helping you achieve your goals. |
| to help them make an informed decision on how to | | | | |