At tax season, tax payers nationwide are looking forward to the glorious tax refund. You work all year long you pay your bills and you've been conditioned that a income tax refund is some sort of reward.
Have you always felt a large refund is a come up?
YES
NO
Contrary to popular belief a large refund may not a come up. While you are working, you have federal withholding subtracted from your check (income tax) to reduce amount of taxes you may owe after filing your taxes. If there is an overpayment found after you file your taxes, the IRS will issue you a refund. So, instead of using your money to take care of expenses or putting your dollars in income generating vehicles, you voluntarily gave the government an interest free loan.
How can I reduce my taxes taken from my paycheck?
You can reduce your income tax by filing out your W4 form with your employer correctly and keeping it UpToDate. The new forms are supposed to mirror how you will file your taxes. Do not claim dependents on your W4 form if you will not claim dependents on your 1040 at tax time. Do not follow the advice of another employee because tax situations are not 1 size fits all. A common mistake made by taxpayers is listening to fellow employees who have a totally different tax situation than they do and end up owing taxes. Contact tax professionals for tax matters.
Pay yourself first by contributing to a retirement account. An employer-sponsored retirement plan where your contributions are usually taken out of your paycheck before your income is taxed and directly invested in your employee retirement plan. The advantage of this is 1- the employer will offer a match contribution of some sort, 2-you reduce the amount of your income is taxed, 3-depending on your income status, you may qualify for the retirement savings tax credit.
Tax planning with your tax professional.
What is the Maximum Earned Income Tax Credit?
Earned Income Tax credit is given to those who earned wages but their incomes per their household size met or exceeded poverty levels.
2024 Earned Income Tax Credit
Number of children | Max income: Single, head of household, or widowed filers | Maximum earned income tax credit amount |
No children | $18,591 | $632 |
1 child | $49,084 | $4,213 |
2 children | $55,768 | $6,960 |
3 or more children | $59,899 | $7,830 |
So, if you are a single parent of 5 meeting the income standard for the max refund of $7830 and your refund is $15,000, you more than likely overpaid the government while in poverty status causing financial struggle to your household.
I don't want to owe, so I rather over pay.
Again, you are volunteering to give the government an interest free loan. The IRS is not a financial institution in which they will be pay you for the usage of your money. It is better to put money in your retirement account, money market account, purchase a government bond so the government can actually pay you interest, or use any other investment vehicle that will give you a return other than simply requested it back in the form of a tax refund.
What is the Goal
We are conditioned to anticipate awaiting a refund every tax season. It is advertise as extra money to handle expenses or to splurge when it is just a refund of your WAGES.
The goal here is to change your mindset and perception so that you can make better financial decisions.
Retail Merchants, car dealerships, travel agents, contractors, and even tax offices are known for targeting people and their refunds with higher rates. It is better to maintain and stabilize your household throughout the year than to wait for tax season when prices are higher. Fraud people and scammers run ramped during tax season with their get rich quick schemes, Ponzi investment groups, money flip scams, or what have you. Never trust your money with any group that isn't registered with SEC, or with anyone who is not licensed as a financial planner or broker.
This is why TAX STAR MOBILE, LLC makes it a point to reach out to clients before filing taxes to resolve or plan a resolve for their financial issues. The goal here is to stabilize before allowing other to capitalize off your desperation and eagerness.
There are those who can make up to 6 figures per household who do not owe taxes. They either break even or generate a small refund. Why? because they take an active role in their finances by consulting with credible professionals, making an effort to tax plan and put the proper protocols in place to reduce tax liability, and monitor their spending by reviewing a monthly budget. The goal is to take an active role in understanding your finances and consulting with credible sources.
So if you would truly like to come up with tax filing, become active in your finances by reviewing monthly budgets and tax planning, identify monthly and annual goals, use credible sources for consultation and pay their worth, and take the emotion out your spending and concept of money management. Change your perception about money management by unlearning the conditioning and behavior patterns that are not working for you.
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