Turn the pain of income taxes into a personal success opportunity. Let’s face it. Income tax is a necessary evil. Or is it? You can use your income tax return as an opportunity to springboard to higher income and financial security
TAKE CONTROL OF YOUR INCOME TAX PREPARATION
Whether you use the traditional paper forms, online tax preparation software, or pay to have your taxes done for you, it is to your benefit to understand the process. Knowing how tax codes apply to your situation helps you understand your options when it comes to paying or claiming deductions. By understanding the law and the taxation process, you will be sure to get every deduction due to you.
You’ve seen the lines at the post office on April 15. Many Americans choose to put off their tax preparation until the last possible second. This is never a good strategy whether you expect a refund or expect to pay. If you are expecting a refund, wouldn’t you rather have it as soon as possible? After all, this means you have allowed the federal government to earn interest on your money all year. Do you really want to give them another four months of interest on your money? Filing your taxes in January means that you’ll have two and a half extra months to earn interest or invest your money and it will take far less time to process your return.
If you have to pay, that is all the more reason to calculate your tax liability ahead of time. That doesn’t mean you have to send the check early, but knowing a few months ahead of time will give you time to prepare. That way, the hit won’t be so bad when it comes to mailing out that check. You may even avoid filing an extension by planning ahead, which can save you penalties and interest.
DON’T VIEW YOUR REFUND AS “FOUND MONEY”
You worked hard for your money this year. Don’t blow your refund on frivolous things like expensive meals, vacations and luxuries. Especially avoid tax season “sales” like those common at car dealerships where “your refund is your down payment.” Falling victim to this kind of advertising will ensure that instead of your refund benefitting you, it will instead lead to the accumulation of more monthly debt. Instead, proceed as if you had never received a tax refund. This can allow you to springboard to higher income.
PUT YOUR REFUND TO WORK FOR YOU INSTEAD OF AGAINST YOU
Instead of using your refund as a springboard to more debt, put it to work for you. This can be in the form of stocks, mutual funds, or even in a money market account. By investing your refund you can be sure to make the most of this money. In this way, your refund was like a savings account (except the government took the interest all year). Remember, this is your income that you’ve waited a year to receive. Don’t let it go to waste.
By treating your tax refund as a part of your income (and it is), you can use it to generate investment income. This investment income can launch you into a future of prosperity and financial freedom. By learning to plan ahead and develop good habits (even with your so-called “extra money”) you will be able to provide a substantial living for yourself in the present and in the future.