Hook, line and sinker
One of the biggest hoaxes ever put on the average “Joe-Citizen” is the income tax refund. The truth is that for more than 12 months you gave the government an interest-free loan. That is not good business sense. That’s money you didn’t have to either:
a) invest with, or b) reduce debts.
Every tax season, ad after ad extols the virtues of the big juicy tax return. I want to know “where’s the meat?” Their gall: It’s bad enough that “Uncle Sam” took your money first, but then comes “Joe-Blow” charging you a fee to get it back “quickly.” Two errors do not make it correct.
Call it what it is: “yours” minus “theirs.”
Can I make it simpler? – you lose the use AND interest potential of your money for at least 12 months and then the fee to get it back. Refunds are not the ideal situation; much better is “Even-Steven”.
Sure, it’s exciting to get a nice check from the IRS (correctly, the US Department of the Treasury), but this isn’t the lottery.
You got what you paid for. “Yours”, NOT “theirs”; And as the saying goes, there’s still “no such thing as a free lunch.”
Despite the tax “credits”, you kept…
TWO FACTS:
1) You gave the federal government an interest-free loan.
2) You had to go with less money in your pocket or bank account.
What is that in dollars and sense? The IRS records that in fiscal year 2008, more than 100 million Americans received tax refund checks, with an average refund of $2,429, only slightly more than the previous year. Do the math–
That’s 100 million Americans X $2,429 (average) = $242,900,000,000
NO INTEREST to the US government.
And for all their cunning hooks, lines, and sinkers, they were no better administrators. Open your eyes and look!
Lies breed lies. Why do people assume that just because he’s called “Uncle Sam,” he has what’s best in his heart for them? Why wouldn’t you want an interest-free loan? Sure, tell people what they want to hear: we have the earning potential in our hands.
Well, I cry “uncle”. Let’s turn this around so we’re clear: what about your creditors? Would they forgo their interest payments? Not likely.
Let’s get radical: adjust your withholding and put the extra into something that pays you.
For those who still “need” their refund, of course you do, now not next year. Your money should earn you interest. Now more than ever, make every penny count! You decide how, where and, most importantly, when to invest your money. A tax refund is the most retrograde form of saving.
Over the years, people use their tax refunds for a family vacation, a new TV, or other non-essential items. More often, others pay service fees so that their money is “rushed” to pay off the debt. Whose money is it again? Your money minus your earnings minus your fees and service charges to pay your creditors’ fees and charges.
Return to basic. Discipline yourself to put that extra from each paycheck into savings. Maybe a “rainy day” background. After you cover that base, build your line of defense: life insurance, IRAs, annuities, 401(k), savings bonds, and maybe a mutual fund if you have the resources.
Remember: “Shame me once, shame me, but shame me twice, shame me.” That tax refund is YOUR money MINUS interest earnings MINUS a service charge to “speed it up.” And you keep paying interest to others.
Try to have the correct amount withheld from each paycheck and put that extra money to work for you, not “Uncle Sam.”
For self-employed workers or those with investment income, your estimated payments should be equal to or proportional to your actual earnings per quarter. Your professional tax planner can easily help you.
On the other hand, if you anticipate owing taxes, why not earn something that can ease the bill? Let good planning and discipline work together for you. Why should your money work for the IRS? You have nothing to lose and freedom to gain.
Every tax season, they bait the bait, but that doesn’t mean you have to stay stuck.