Tax season is right around the corner…and even if it’s not, there are a few things you can do right now to help yourself when it comes to your income tax refund. These three surprising things about your income tax refund might inspire you towards a smarter way of thinking about taxes.
1. Your Tax Refund is a Gateway for Theft
That’s right, crafty thieves have been stealing money from taxpayers for years now. If you haven’t heard of this then it’s really time to start reading a paper now and then, because tax-related identity theft is rampant. The IRS has poured mountains of resources into preventing identity theft and developing ways to figure out which tax returns are fraudulent.
Even if you may not have heard of this, perhaps you noticed it takes longer to get an income tax refund these days? That’s probably a direct result of the IRS’s new anti-fraud program, where returns are picked over with a fine tooth comb. They’re searching for signs of fraud.
What can you do to prevent this from happening to you? Try these for starters:
don’t give out your personal info to anyone
the IRS doesn’t send you emails asking for personal data
the IRS doesn’t call you asking for personal data
the IRS only sends letters when they need to contact you
never “log in” to any website other than IRS.gov
2. When it Comes to Your Income Tax Refund, Size Does Matter
Perhaps you’re one of the “lucky” ones who gets an enormous income tax refund. The national average is almost $3000, certainly a nice windfall for any income level. However, in this case sometimes better things do come in smaller packages. A tax refund that’s too big means you’re missing out on your own money. You could have had that dough all along because it’s yours.
On the other hand, a tax refund that’s too small means you’re awfully close the point where perhaps you didn’t have enough taken out of your paychecks. When that happens, you’ll owe the IRS money come tax time. Not only is that painful, but they assess penalties for people who underpay their taxes.
Either way, get a fresh W4 form and re-submit it to HR. That’s how you control the size of your income tax refund.
3. The Income Tax Refund is a Savings Account for Dummies
Seriously, if you’re that much of a financial dolt, then maybe it does make sense to have your employer over-withhold from your paychecks. It forces you to save money. Of course, the price you pay for being a financial peasant is that you are essentially saving your money in a non interest-bearing savings account.