Tax Refunds & Advice

Most tax payers believe that it is better to receive a refund than to owe the IRS additional money. While this may be a common belief, it is not exactly the truth. Generally speaking, you should strive to reach a break even point in which you do not receive a refund or owe any money. If you can locate this point, it means that you are paying the correct amount of taxes throughout the year.

Why don’t you want to receive a tax refund? If you receive a refund, it means two things. First off, you were paying too much in taxes during the year. The excess money that you were paying in taxes could have been used for other items such as funding an IRA or anything else that would make your life a bit easier. To go along with this, you are more or less loaning the government your money, interest free, if you pay too much in taxes. Sure, you will get the money back in the form of a refund, but this does not change the fact that you let the government use these funds for several months.

If you have consistently received tax refunds in past years, it is time to change your paycheck withholding amount. You can do this easily enough by speaking with your employer’s human resources department. They will be able to supply you with the proper paperwork needed to change your withholdings.

It may feel good to receive a tax refund, but reaching a break even point will feel even better.

While not everybody receives a tax refund, this is something that most people strive for. This is not to say that receiving a refund is a good thing, but most agree that it is better than owing the IRS more money. That being said, what do you do with the tax refund that you receive? This is a question that can be hard to answer, as well as one that can change from year to year.

Should you always save your tax refund? There are many benefits of saving any money that you get back from the IRS. First and foremost, this money can be used to build up an emergency fund. Since you can consider this “found money” you will not find it as heartbreaking to add the funds to a bank account for future emergencies. While this may not be the most entertaining decision, it may be the smartest.

Another benefit of saving your tax refund is that you can use it to pay taxes in the year to come if need be. Remember, just because you receive a refund this year does not mean that this will hold true next year. Many details can change throughout the course of a year. Depending on what happens, you may end up owing the IRS money instead of receiving a refund. If you saved your last refund, this is money you can use to pay tax liabilities in the future.

Whether or not you save your tax refund (if your receive one) is up to you. If you are well off financially, saving this money may not make that much of a difference. But at the very least, you should consider the benefits of stocking this cash away in a safe account.

Although the tax filing deadline for 2007 is still a week or so away, approximately 47 million taxpayers have already filed. According to the Internal Revenue Service, almost $107 billion in refunds have already been claimed. As you can imagine, there is plenty more to come as millions more rush to file before the deadline.

The average refund to this point is $2,708, as reported by the IRS. Although taxpayers receive the same refund no matter how they file, this year has been the most popular for the e-filing option. Of the almost 47 million who have already filed, 38 million have done so electronically. This is an increase of five percent over last year’s number at this time.

Although many use the e-filing method through their tax professional, there is a growing group who has decided to rely on this option when filing on their own. Approximately 12.3 million taxpayers have filed electronically from their home computer. When compared to last year, this is a 14 percent increase. What does this say? Simply put, those who are doing their own taxes are finding it simpler to use the internet to file as opposed to the old method of paper forms.

With April 15 closing in, more and more taxpayers will file as to avoid a penalty. As this happens, the number of refunds is sure to grow exponentially. If you have yet to file, get started right away. You do not want waste your refund money on late fees, do you?