As we all know, it’s that dreaded time of the year.
No, I’m not talking about the six-month dental checkup. I am referring to tax filing time; the time of the year where you find out if you are receiving a nice little “gift” from Uncle Sam or if you are having to send some more money to our friends at the Internal Revenue Service.
It’s around this time when I get questions about whether it’s sound financially to try to get a larger tax refund. Or, to paraphrase from the play Hamlet, “To refund, or not to refund?
A tax refund is essentially providing the IRS a loan of your money throughout the year and then they pay you back at tax filing time, without paying you any interest for the time period that they held your money. So, the thought of giving the government an interest free loan doesn’t sound great.
I understand the sentiment. However, there are some things to consider before thinking that getting a tax refund is a bad financial strategy.
I am of the thought that any method that assists and allows you to save, regardless of how poor the return, is a sound strategy. Saving money is tough.
If allowing the IRS to hold your money during the year is a good method for you to save money, I recommend pursuing that strategy. I have seen how impactful that strategy can be for families.
A large refund can fund things that typically are hard to manage, such as: medical expenses, paying for your kids’ activities, educational expenses, vacations and debt reduction.
These are just a few items I see tax refunds being used to assist families financially.
Instead of guessing and hoping for a big refund, I recommend that you talk to someone who prepares your taxes for advice for how much to have withheld from your paycheck.
Additionally, your employer can make adjustments to your withholding for taxes if you desire to move that figure up or down.
Nationally, the average tax refund is $2,933, and in Missouri, it is $2,205. A refund of this size can be a great benefit to families, especially when it can be tough to consistently save money throughout the year.
As I mentioned, you can actually plan the size of your refund by doing some planning ahead and then communicating your withholding plan with the accounting department of your employer.
I wish you all the best in your tax and financial planning for this year and into 2024. And, I hope it is much less painful than my most recent trip to the dentist, as I’ve found that root canals are not only painful, they aren’t cheap.
Happy Tax Day!
Jon Horner is a local community bank president, published author, and motivational speaker. He can be reached at jonhorner77@ gmail.com.
