It happens around this time every year.
Flowers bloom, yellow blankets of pollen drape like curtains on our vehicles, NCAA bracket pools run amuck throughout the office - and of course, the IRS puts on its best “Santa Claus” impersonation.
That Jolly fat man is handing out money (tax refunds) like it is his job – but BEWARE – this version of Kris Kringle has been holding your money hostage.
To some, a large tax refund may feel like a free ride in Santa’s sleigh, but it isn’t.
Let’s put this into perspective. When you took out a mortgage on your home did the bank provide you 0% financing? Nope – sure didn’t. They even charged you interest on the funds in escrow while you signed the Mount Everest-like mountain of closing documents.
Carry a balance on your credit card? Yup, no free lunch there either – the credit card companies want compensation for you to use their money.
Yet – every year, we loan “Uncle SAMta” our money, at no charge, and we are filled with joy upon its return.
Psychologically, it’s not terrible to receive a small refund. But if you substantially overpay throughout the year, it’s not the right move.
How can you keep Uncle Sam from holding your money hostage?
- Review your W-4: Find the right balance on your withholding based on household income, tax bracket and the deductions you take.
- Compare past tax returns: Unless you’ve had major changes in your personal and/or business life, your tax levels should be similar from year to year.
- Talk to your accountant: The right withholding will vary from one family to the next.
I urge you to speak with your own personal Hostage Negotiator (Tax Professional) to create a plan to keep your money working for you year-round.
This information is not intended to be a substitute for specific individualized tax advice.
Securities offered through LPL Financial, Member FINRA & SIPC. Investment advice offered through IFG Advisory, LLC, a registered investment advisor. IFG Advisory, LLC and Magnolia Financial Group are separate entities from LPL Financial.