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Further
Reading ...
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How to Determine if Your HOME is Right for Your HOME-Based Business - Suzane Pyburn
Before you decide to give your notice at work, tell your boss what he can do with his job, hang out your own shingle and start a home-based business, there are several things you'll first want to consider about your home. 1. Is it in a quiet...
Part 3 of 5 - How "Pipe Dreams" Can Become Realities! - Jon Kogan
DO YOU HAVE THE POTENTIAL? Within you is the power to accomplish anything you want. But it will not happen if you are not tuned into your true desires. Don't fool yourself into compromising for less than a complete goal. If you want to be an...
Pre-empt Radiation or Die - Burak Fenercioglu
Professor Lawrie Challis reminded President George W. Bush’s doctrine of pre-emption with his invention. Now, it is time for mobile industry to put their act together unless they are ready to become the next customer battleground. --- At West...
Rearrange Your Affairs For Maximum Tax Savings - J Stephen Pope
One way to maximize your business profits is by reducing your taxes. Frequently, income and other taxes could be lowered significantly if only the taxpayer were willing to plan ahead. By taking some simple steps to rearrange your affairs, you...
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5 Reasons Why You Should NOT Get A Big Tax Refund
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Written By:
Wayne M. Davies
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I will never forget the day one of my tax clients
came to pick up his personal income tax return.
"How's it look?" he asked.
"Well," I said, "You're getting a refund."
"Great! How much?"
"Oh, it's a big one," I said. "Over $5,000 dollars."
Mr. Taxpayer couldn't have been happier. He face lit up
like a light bulb. He was ecstatic -- he sincerely believed
that he had "beat the tax man" by getting such a large
refund.
I was not so happy. I couldn't understand his thinking.
So I asked him if he really meant to get such a big
refund. Mr. Taxpayer was a W-2 employee and so I wondered
if his payroll department made a mistake -- were they
doing his withholdings wrong? Did he really want to
have so much tax taken out of his paycheck each week?
Mr. Taxpayer went on to tell me that he has a
tremendous fear of having a balance due on his return. For
some reason, he just assumed that if he ended up owing money
to the government at the end of the year, somehow he
would get in trouble with the IRS. So he went to the
opposite extreme.
In addition, he thought that getting a big refund was
a great way to save money during the year, so that at the
end of the year he got a nice little "bonus" from the
government. You know, a forced savings plan.
I can think of at least 5 reasons why Mr. Taxpayer's
thinking is flawed.
REASON #1: When you get a big refund, you are loaning
your money to the government.
My biggest objection to getting a large refund is the
simple fact that you have given the IRS an interest-free
loan of your hard-earned money.
Mr. Taxpayer's $5,000 could have been earning interest over
the course of the year. So by letting the government keep
his money, he was actually losing money!
Sure, with rates so low, maybe we're not talking about
a lot of interest income here, but why give the government
your money any sooner than necessary?
REASON #2: Getting a big refund does not mean you are paying
less tax.
I know how complicated are tax system is. It's crazy,
convoluted, chaotic and inconsistent. I deal with our tax
laws every day, and there's stuff in there that will drive
any sane person over the edge.
But on this point, there really is a lot of misunderstanding
on the part of innocent (but misinformed) taxpayers:
Getting a large refund does not mean that you somehow paid
less tax than if you got no refund.
I'm serious here -- there are taxpayers out there who think
that getting a refund means that you somehow "beat the
system." This is nonsense. Think about it -- all you did was
get your own money back! It was your money - continued below ...
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continued ...
all along,
all you did was postpone getting it.
REASON #3: Having a balance due does not increase the chance
of audit.
If you have a balance due, you do NOT end up on some IRS
"hit list." But for some reason there are many taxpayers who
have this unfounded fear of owing money to the government.
This fear causes people to unnecessarily go to the opposite
extreme -- "I've got to make sure I never owe, so I'll just
have way too much withheld to be safe."
Safe from what? This fear of an audit is pure hogwash.
REASON #4: Getting a large refund is usually a sign of poor
(or non-existent) tax planning.
Many folks do not realize how easy it is to get out of
the "big refund rut".
You have control over how much you pay in to the IRS during
the year. If you or your spouse are W-2 employees, you can
change your withholdings very easily. Just file a new Form
W-4 with your employer and you won't have to wait so long to
get your money back.
If you are self-employed and making quarterly estimated tax
payments, the same principle applies. With a little number-
crunching you can determine the minimum amount of estimated
tax payments you are required to make.
Whether you are self-employed or work for someone else, if
you're not sure how to do these calculations, get help from
your local tax professional.
REASON #5: Getting a large refund is usually a sign of poor
(or non-existent) financial planning.
My client insisted that he needed a large refund so he could
have a nice nest egg to look forward to every Spring. He was
using the government as his short-term savings plan.
I told Mr. Taxpayer this:
"If you want to save $5,000 dollars over the course of the
year, just authorize your employer to deposit $100 per week
into your savings account. Then at the end of the year,
your $5,000 will be sitting in your own bank account instead
of at the U.S. Treasury.
And you won't be in such a frantic frenzy to get your tax
return filed."
So I urge you to reconsider such an approach to money-
management. Why let the government have your money? Don't
wait until the end of the year to get your money back. With
a little planning and self-discipline, you can take control
of this part of your life.
About the Author
Resource box:
Wayne M. Davies is author of the new eBook, "The Tax
Reduction Toolkit: 29 Little-Known Legal Loopholes That Will
Reduce Your Taxes By Thousands (For Small Business Owners
and Self-Employed People Only!) Don't file another tax
return until you visit:
http://www.YouSaveOnTaxes.com/toolkit.html
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| _Additional Resources ... |
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The Financial 'Killing Field' - John Summa
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5 Things How Credit Report Rating Can Save You From Fictitious Credits - Khali S
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Put Some Pizazz in Your Software Arsenal - Dean Walden
The software giants don't do everything and don't always produce the result that we want. At least if you're like me, and you're not where you would like to be (profitwise). The fact is that there are tons of small software companies looking...
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