Getting a Tax Refund or Not?

I am a big believer in NOT getting a tax refund. A tax refund is giving the US government a tax-free loan. You can get that money on a monthly basis to spend, save, or invest to build wealth. Many people use a tax refund as a forced savings. Big mistake! If you understand the time value of money, you will know that it is better to get the money in your hands now rather than later.

It’s not an easy calculation, but here is a tool you can use from the IRS to decide how many withholding exemptions you need to get more or less tax taken out of your check.

For a high tax state such as California where I live, we may be getting no state tax refund at all due to the budget problems. See this:

“the CA State Controller announced on Friday, January 16, 2009, that because of the state’s cash shortfall he will have to delay refunds for 30 days starting February 1, 2009 for Personal Income Tax and Business Entity taxpayers. Refund payments will resume when the State Controller indicates there is enough cash available to make refund payments.“

Whether you are an individual or business, you need to keep track of the taxes you pay and the taxes you owe. One of the 7 Steps to Creating your own Financial Plan is tax planning, and you can review that portion in step #7 tax planning. You will find tips on tax deferral, tax, credits, and tax deductions.