Do you really want a tax refund?
It's tax season again and over 96 million people will receive a tax refund. Many of whom are going to celebrate this flow of income as if they just got a bonus or won a small lottery.
Receiving a refund is no time to celebrate. You should really be asking yourself why you got a refund. Why is the IRS giving me money? It's because it is YOUR money. You basically just gave a loan to the government at zero percent interest. You could have made more in your savings account, online bank account, investments or made needed purchases. Wouldn't you rather receive a higher paycheck instead of loaning your money to the government? What if you could have been putting that money towards your 401K or IRA? That is lost money. You are losing money by receiving a refund.
When you receive a tax refund that means you overpaid on your taxes for that year. You should be aiming at breaking even or paying a small amount. To be more vigilant on your taxes, look at your W4 and see what you have put down as your dependents and additional withholdings.
JP and I almost always have to pay taxes. Which is why you have seen taxes in our flywheel account. The only time we have ever really received a refund is when we were servers and now this year we are likely to break even. I am still waiting on some documents to complete our taxes, but using rough estimates, we owe Colorado money and the Feds are returning our overpayment and it is basically a wash. You Texans out there are lucky you do not have state income tax.
I recently had an interesting conversation with someone about how they do their taxes. And I would not recommend this to anyone, but thought it would be fun to mention. He is a W2 employee and does not make any tax payments until the end of the year. Instead, he invests that money and then when October comes around, he increases his withholdings and pays the last quarter of the year and then owes the government anything else come April 15. This is risky if you are not good with money. Because if you do not have that money to pay your taxes, you will likely have penalties and interest.
So, for 2020, look at the W4, talk with a CPA and determine what you need to do to try to break even. Comment and subscribe.
Receiving a refund is no time to celebrate. You should really be asking yourself why you got a refund. Why is the IRS giving me money? It's because it is YOUR money. You basically just gave a loan to the government at zero percent interest. You could have made more in your savings account, online bank account, investments or made needed purchases. Wouldn't you rather receive a higher paycheck instead of loaning your money to the government? What if you could have been putting that money towards your 401K or IRA? That is lost money. You are losing money by receiving a refund.
When you receive a tax refund that means you overpaid on your taxes for that year. You should be aiming at breaking even or paying a small amount. To be more vigilant on your taxes, look at your W4 and see what you have put down as your dependents and additional withholdings.
JP and I almost always have to pay taxes. Which is why you have seen taxes in our flywheel account. The only time we have ever really received a refund is when we were servers and now this year we are likely to break even. I am still waiting on some documents to complete our taxes, but using rough estimates, we owe Colorado money and the Feds are returning our overpayment and it is basically a wash. You Texans out there are lucky you do not have state income tax.
I recently had an interesting conversation with someone about how they do their taxes. And I would not recommend this to anyone, but thought it would be fun to mention. He is a W2 employee and does not make any tax payments until the end of the year. Instead, he invests that money and then when October comes around, he increases his withholdings and pays the last quarter of the year and then owes the government anything else come April 15. This is risky if you are not good with money. Because if you do not have that money to pay your taxes, you will likely have penalties and interest.
So, for 2020, look at the W4, talk with a CPA and determine what you need to do to try to break even. Comment and subscribe.
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