Who Doesn’t Like a Refund?

Imagine that you’re walking down the street, and you see a hat on the ground.  You are curious and you pick up the hat, to find a stack of cash underneath it.  There’s no penalty for keeping it, it’s just free money.  You keep it, and you’re happy.

Imagine instead that you went to that hat every day for a year and placed a dollar underneath it.  No one but you knew the location of the hat, so there was no danger of someone stealing the money.  But every day, you stopped and placed $1 underneath the hat as opposed to taking the money home with you, or buying groceries.  On April 15, you stop at the hat each year and take your $365. 

Are you still happy? Or do you feel as though the money was yours all along, but you just let the hat guard it for a year at 0% interest and 100% opportunity cost?

Yeah, that’s how tax refunds work for most people.

I know that there are circumstances that create refunds for taxpayers, and those little added bonuses are nice and unexpected. Your child is in college, and you are due a refund because of the American Opportunity Tax Credit, for instance.  Or you make about $75k as a family and you receive the tax credit for participating in a pension plan at your work.  You didn’t expect them, but they happened.  Those are refunds granted to you by the IRS not because you paid those taxes up front, but because you made other decisions.

If you’re the kind of person who gets those “hat refunds” and you want to begin holding onto your own money, this is your invitation to do something different.  Our clients who work with us throughout the year often ask us to help them forecast their tax liabilities so they can make changes to their exemptions and take more of their paycheck home each pay period.  I love doing that.  I worked with a client last year who always received about $18k each year in refunds.  This year, he owed about $1k in taxes, but guess what?  He was able to utilize the $18k throughout the year rather than waiting for a large chunk in April.  I was proud of him.

If this appeals to you, what are you waiting for?  Get in here.