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At the end of each Rocky and Bullwinkle cartoon segment, the narrator would always close with an obvious question pertaining to the dilemma that Rocky and Bullwinkle were in, and a follow up not-so-obvious, thought provoking question that was the lead to the next segment. Don’t ask me why I remembered this but I do.
Where’s My Refund? If you want to know where your refund is, the IRS has a nifty link on their website (IRS.gov) titled Where’s My Refund? Just click on the link and it takes you to another webpage where you click on yet another link, and then enter your data. They can tell you what the status is of your refund. According to the IRS, 9 out of 10 folks received their refunds in less than 21 days and the nationwide average refund was about $2,700.00. Of course if you E-Filed your returns, the timeline is a bit shorter, and if you indicate a direct deposit into your bank account, it is even shorter still.
Or does it really matter? Here are a few simple facts to put the “Where’s My Refund” question into perspective. First off, it is your money, and has been your’s all year long. Picture the calculated refund as being in your left hand, and pretty soon it will be in your right hand. Second, most taxpayers receive refunds back because they are employees who have income tax withheld from their compensation that is in excess of their tax liabilities. Plain and simple. The Federal Government has been holding onto this refund money all year long. Sort of like making an interest fee loan. So if a taxpayer is willing to make an interest free loan for the past 12 months, what’s a few more days?
I know some like the idea of having excess income tax withholding because they use it as a forced savings account for vacation or whatever. From a financial planning perspective, maybe not the best idea, but if your weekly bills inhibit you from saving each week or each month, this method is better than the alternative. Other folks like to have excess withholding to make doubly sure that they don’t have to cough up money to pay any tax come April 15th. Having to pay with your tax return will really ruin your April 15th holiday.
So, the tip for this topic is, try to set your withholding, and/or your quarterly estimated tax payments to approximate what your projected income tax responsibilities will be for the year. It will take some forethought and planning, but you can revise your withholding to approximate your estimated annual tax calculations. Then, and perhaps the most important aspect of this tip, in regiment fashion, be sure to bank the specific difference each week or month as an alternative to that so-called forced savings account.
Disclaimer – Bruce Baer is a CPA with Baer and Company, CPAs, which advertises with Journal Register Co. publications.
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