Earned Income Tax Credit | Getting An Income Tax Refund? Is It The Best Use Of Your Money?

Getting An Income Tax Refund? Is It The Best Use Of Your Money?

Out with the old and in with the new… a new year is upon us, and with the holiday celebrations being over we are returning to a normal routine daily life. It is this time of the year that the thoughts of many turn to getting their taxes done. Now that tax season is upon us a large number of taxpayers are expecting a present from Uncle Sam in the form of an income tax refund. Will you be one of those individuals looking for to this lump-sum payment? If you are you may want to take a look at the reason you’re getting so much money back from the federal government and whether or not it is a smart thing to do.

Since during tax season there only three possible results, either you get an income tax refund, you breakeven, or you end up owing money you have some options in the way you can plan your withholding over the course of a year. To put this all in basics taxes are withheld from your paycheck over the course of the year and at the end of the year how your taxes you will find out whether you paid too much into the system which will result in you getting an income tax refund or you will breakeven kind of unlikely it would be pretty hard to have paid exactly the amount required with the huge amount of tax laws and mathematics that are used to calculate how much you actually owe or you will find that your tax withholding was not enough to cover your tax obligation and you will owe the government the difference.

In your tax planning you may want to look at how much you’re getting back from the government on average over the years. Last year the average income tax refund was over 00. Now that seems like a good thing, however, you are giving the government a free loan of your money until such time as they pay you back. Many people, after they consider it may want to have this money available to them throughout the year. Instead of giving the IRS a free loan you would be able to keep over  0 additional in your take-home pay each and every month.

If you have not decided that you would rather have the hundred a month instead of the lump-sum check when you file your taxes can take advantage of the IRS withholding calculator which can help you figure out how to fill your W-4 out before giving them to your employer. You can find a handy withholding calculator at http://www.IRS.gov Keep in mind that you are also allowed to change your W-4 at any time throughout the year especially if you have personal changes in your life such as a new child, marriage etc.

A large number of people view their income tax refund as a windfall when in actuality it is the government letting them have their own money back that they had been holding for up to a year. If you really consider what is happening here and think about actually having access to this money throughout the year you may look at this differently and not consider your refund as the best use of your hard-earned money.

For further reading about your income tax refund

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