Happy and excited to receive a big tax refund check, think again…
That’s because receiving a big tax refund is actually a bad thing…
A big tax refund indicates you are paying too much in taxes….
The # 1 mistake which most taxpayers make is overpaying taxes. A big tax refund signals unplanned taxes. This situation can be easily avoided if you plan your taxes, thereby not giving interest free loan to the IRS.
Below is some useful information regarding what you can do to manage your tax refunds in this upcoming year :
- Review your W4 beginning of each year : The W4 form is the form that you would have filled out when you joined the company. It is a form that you indicate ‘single’ or ‘ married and number of dependents. If incorrectly filled, excess amount is being withheld than what may be necessary. As a result you are paying upfront higher taxes to the Internal Revenue Service. A correctly completed form can save you thousands of dollars especially for individuals in higher income brackets and it is often overlooked.
- Prior year tax returns : In few situations, comparing to prior year tax returns can provide useful information Eg: You may not have contributed enough to the health savings account or you probably missed your IRA contribution this year.
- Seeking help of a tax professional : Tax professionals are trained in tax planning. Therefore, if you lack the expertise to manage & plan your taxes its best to seek the services of an experienced tax professional. The service fees you will pay will more than pay for the benefits you will reap.
- Tax saving investments : Individual retirement accounts (IRA), Roth IRA, 401 (k), Health savings accounts etc are all the various options every individual tax payer has to save taxes. Every taxpayer should take advantage of these opportunities. Consult a financial advisor & your tax professional for more information.
Important resources
Link to W4 form
https://www.irs.gov/forms-pubs/about-form-w4
How to check tax refund status?
https://sa.www4.irs.gov/irfof/lang/en/irfofgetstatus.jsp
Other posts
2018 Tax deadlines
2018 Tax refund schedule