Might Want to Rethink That Refund
March 28, 2011 (The Daily News, Jacksonville, N.C.) As the deadline approaches for filing 2010 income tax returns, many last-minute filers are those who may be sending a payment with their tax return rather than receiving a refund.
The traditional filing trend is a peak in February as taxpayers anticipating a refund file and then a second peak in April when about 20 percent of the returns are filed, many from taxpayers who owe money, said Mark Hanson with IRS media relations.
Not getting a refund isn't necessarily a bad thing, tax professionals with CompleteTax remind taxpayers.
"You want to minimize your taxes. However, many taxpayers feel that they've somehow lost if they end up owing -- even though they many have actually won by keeping more control over their money," said tax preparation professional Gary Lundberg.
In a news release, CompleteTax notes several reasons to feel better about not getting a refund:
If your goal each tax season is to bring home a big refund, there are reasons to reconsider, local tax preparation professionals agree. Gary Boykin of Boykin's Tax Service in Jacksonville said many people look at their tax refunds as a way of setting aside funds for a big expense such as a home improvement project or a family vacation.
"It comes down to the individual," he said. "Some can't save (money) themselves and bank on that refund for something big."
But for those willing to rethink their refund, he suggests another possible option: Adjust your tax withholding to avoid overpayment and hold back that money in your paycheck. It can then be put aside in a savings account to be used later.
"By the end of the year, your $30 a week has built up to $1,500," he said as an example.
And unlike waiting for a refund, you have access to that money when you need it.
Debby Mallette of Advantage Financial Services said that tax refunds are a refund of a taxpayers' own money after taxes owed.
"You are getting a refund of your own money, and you only get that back once a year," she said.
Rather than waiting until tax time to get that money back, taxpayers could be getting that same amount back in their paychecks throughout the year.
"Put your money in your pocket or paycheck and make that money work for you rather than getting it back once a year," Mallette said.
On the flip side, tax preparers say it's equally important to make sure are paying enough in taxes.
Taxpayers who ended up owing a considerable amount may want to adjust withholdings to make sure that they are paying more during the year to avoid any underpayment penalty, CompleteTax said.
A free W-4 calculator is available at www.completetax.com/calc.asp to help people determine what their optimal withholding should be. Or visit a local tax preparation professional.