The average American taxpayer receives a refund each year of almost $3,000. That is a lot of your money for our friendly government to have and use, interest free, each year until they give it back to you.
Of course, with interest rates rarely breaking 1%, and sometimes just barely above zero, I guess it doesn't matter like it once did.
When interest rates do begin to rise, I would argue that getting a large tax refund is not a good thing. That is money you do not have to spend or save until the following spring. I know that some folks treat the refund as forced savings, but you are giving the government a loan and cutting into your monthly cash flow.
For now, the reality is a few thousand back into our pockets over the next few months. So, my questions are simple:
1) Do you prepare your own taxes, with software or a pencil and calculator, or do you have a professional take care of it?
2) Are you expecting a refund for 2015?
3) If so, what are your plans for that money?
I will get things started:
1) I use Turbo Tax to complete my return (with Betty), my dad's final return after his death last year, and the trust return for my parents' estate. Doing taxes myself is much less expensive and gives me a sense of control over the process. Have I made mistakes? Probably. Am I missing some deductions? Maybe, but not significant ones.
2) Yes, a small one. Not knowing exactly how much money my parents' trust was going to generate that would become taxable to me, I made a few quarterly tax payments that were a bit higher than they probably needed to be. But, my advisor was quite close in her estimates, so there is a little coming back.
3) Put it into the checking account for bills and living expenses. One year, after some major medical expenses, we did get a larger than normal refund that was used for a vacation. But, that is very rare. My goal each year is to get back, or owe, less than $200.
OK, your turn.