It’s that time of year again – time to file our income taxes. As a shout out to all of tax accountant friends and the hard work they do at this time of year, please watch the short video below:
Wasn’t that fun? Do you now want to enlist yourself as a CPA combating your clients’ tax issues?
What I actually want to talk about today is tax refunds: those little checks that everyone direly hopes for the first half of each year. Tax refunds actually happen when you have overpaid taxes and the government owes you the overpayment. It sounds like a pretty good deal, but consider that you could have used that money for something during the course of the previous year. Think of a tax refund as a loan repayment by the federal government on a loan you provided to them at 0% interest. The best thing for each of us to try to do is to meet equilibrium where we neither need to make an additional income tax payment nor receive a refund.
However, I think it is safe to say that we would all rather receive a refund rather than pay additional taxes. What’s the best thing to do with our refund when we receive it? I think you know iOme’s favorite answer to that question: save it in a retirement account!
But we also know that putting your tax refund aside for the future isn’t always feasible. While saving for retirement may be preferred to splurging on a vacation or buying a new Fendi bag, it may be a better decision to use the refund to pay off outstanding bills or reduce your student loan principal.
What do you plan to do with your refund? Save? Splurge? Pay bills or loans?