ReFUNd

With tax season quickly approaching, the idea of getting money back from Uncle Sam has you envisioning a big splurge!  With over half of Americans receiving a tax refund planning for what to do with the windfall can be fun.  

The 2018 tax year had taxpayers seeing refunds on average of $3000.   While you may think Americans choose to splurge that refund on unnecessary goods, the most significant percentage intended to save their return.  Regardless of whether you spend, celebrate or save, the majority of taxpayers had a plan in place for that beloved refund check.

I think we all can relate to those unexpected expenses such as car repairs or medical bills that come when you least expect it.  Having an emergency fund is a great option when thinking of what to do with your refund check!  Having money set aside that could cover you when the sudden unexpected life hiccup presents itself can eliminate a tremendous amount of stress.

Once your emergency fund is started, having at least $1,000 or three to six months' expenses saved, paying down high-interest debt is another excellent option.  This may be stating the obvious, but paying off credit cards that charge 18% interest will give you more money in the bank once those cards are paid off.  It's essential to get this debt paid off and let that refund check help.

Finally, tax refunds are great for planning your future, whether it be for a college or a retirement fund.  You'll be grateful once you're at an age when you no longer work, that you put that money in a Roth or traditional IRA instead of spending it on something that wasn't needed.  Similarly, setting up a college fund for your children or grandchildren, such as a 529 plan, can help them afford college when the time comes.

There is no right or wrong way to spend that tax refund, but having a plan in place before it arrives increases your odds of actually utilizing it for what you intended.

Tax Refund 101

Are you in need of a tax refund?  What if I told you that you could control your refund probability? 

We often forget our controllables that can make that refund check a reality.  Although they take a little extra time and may affect modern comforts a bit, it may be well worth it if you get that IRS check.

A quick and relatively painless way to impact your refund potential would be lowering your W-4 withholdings. This will increase your income tax, and while your immediate take-home pays maybe less, you can avoid payout and could get a refund windfall the following tax season.  

Another way to maximize your deductions takes a little bit of organization. It's as easy as labeling a folder 'tax deductions' and placing anything that's tax-deductible throughout the year in this file.  As you begin to plan and prepare, you’ll utilize this folder as it will now contain all sorts of deduction paperwork.  If you find you’re better virtually, Turbo Tax has various software programs such as Quick Books that can help and are also great if you’re self-employed as it keeps track of business expenses and income.

Saving, expanding your education and donations of household goods, have tax benefits too, and are worthwhile avenues to explore.  Saver's Credit is a credit for lower to middle-income taxpayers, and there is the Simplified Employee Pension IRA for those that are self-employed.  Being 50 provides benefits too. You’re able to increase your contributions to your retirement account up to 25,000. For those wanting to learn a new career with a moderate income, the Lifetime Learning Credit is a significant tax credit on tuition expenses.

If this all stills seems too complicated, leave the tax refund rules to the experts as there is software such as TurboTax It’s Deductible, that tracks all of it for you making taxing times, not so taxing!

When You Don't Collect Your Tax Refund

Most people are excited when they find out that they are eligible for a tax refund. However, there are also some cases in which people somehow never get notified of their refund or, for whatever reason, don’t receive it. If this ever happens to you, you may be wondering what your options are and whether or not you will ever see that refund to which you are entitled. However, take a deep breath and relax. Chances are, you can still collect on that refund you’re owed.  

The Three Year Rule

The good news is that the IRS gives you lots of leeway in terms of how long you have to receive your refund. In general, you have a whopping three years from the date of the original deadline of the tax return which warranted you a refund to collect that refund.

So, as long as the three year deadline hasn’t passed, you can still get your money. There are, however, a couple of exceptions to that rule.

To start with, you actually have seven years to claim a refund that resulted from deductions for bad debt or worthless securities. Plus, if you cannot manage your finances due to verifiable physical or mental ailments, the three year rule does not apply in your situation.

After Three Years

If you fail to claim your refund within the allowed three years and none of the above exceptions apply to your situation, then your refund will be termed an “excess collection,” meaning it can no longer be sent to you or applied to taxes you owe.

In effect, it basically goes away, as if it never existed.

To avoid having this happen to you, file your returns when you are supposed to, update all contact information as soon as possible, and always work closely with a qualified accountant and/or financial adviser.

Can You Get a Refund on Social Security and Medicare Taxes?

Tax refunds are often celebrated, but that’s because people don’t realize what they truly are. These refunds are not ‘free money.” Instead, the are simply your own money that you have accidentally overpaid to the federal government during a given tax year. 

And, you can actually overpay in a variety of ways. So, if you happen to overpay to the Federal Insurance Contributions Act, commonly known as FICA, rest assured that it’s still possible to get a refund. In fact, anytime you overpay in any way, you are entitled to get your money back.

What to Do When You’ve Overpaid

If you determine that you have overpaid on your FICA taxes, then claiming a refund Is fairly straightforward and easy. You simply have to fill out IRS Form 843, which is a claim for a refund and request for reimbursement.

It helps if your employer can include a letter substantiating your claim, but you can also include your own letter explaining the situation, which your employer can then verify. Be sure to also include your W-2 form from the tax year in which the overpayment occurred.

To make the process faster and easier and to ensure you have attached all required documentation, it’s a good idea to seek the help of a qualified tax professional. Often, with their help, you can expedite the process greatly.

Avoid the Situation in the First Place

While getting your overpaid money back from the IRS is possible, it’s definitely a hassle. If you’d like to avoid this hassle altogether, then work with a tax professional from the beginning. That way, you can ensure you always pay just the right amount in FICA taxes so that you don’t end up having to fill out extra forms and make extra effort just to get your own money back.

Refund Time?

Many people are excited to get a tax refund. While this is really just money you’ve overpaid on your taxes throughout the year, it can still be nice to get that big sum of money all at once.

Once you’ve filed your taxes, however, waiting on that refund can often be an anxiety-inducing experience, filled with confusion. Don’t worry, though. If you can keep some simple advice in mind, you should receive your refund with a hitch.  

Don’t Use the “Where’s My Refund” Tool Right Away

You are probably aware that the IRS maintains a handy “Where’s My Refund” tool online. Via this tool, you can actually track your refund on its journey to you in much the same way you would track a package. However, don’t expect this tool to work right away, and don’t panic if it doesn’t.

Typically, the tool won’t start working for you until about 24 to 48 hours after the IRS has received your refund. Then, you should see a “return received” status via the tool. Eventually, this status will change to the date when you can expect your refund.

If the tool doesn’t work for you a few days after your submission, then you may want to contact the IRS about your return. Otherwise, just be patient.

Choose the Direct Deposit Option

When you file your tax returns, you will be able to choose how you wish to receive your refund.

While you could have a check mailed to you, the simplest and fastest option is to have funds direct deposited into your account. If you set this up at the time of filing, your refund should instantly appear in your bank account on the arrival date provided by the IRS.

Waiting on your refund to arrive is not fun. But, if you follow this advice, the process should be simpler and smoother with a lot less worrying, waiting, and wondering involved.

The Truth about Tax Refunds

Most people are excited when they find out that they are getting a tax refund. Many people even plan for and count on their refund each year, coming up with big ideas about what they will do with their money. While these refunds get a good name, however, they are actually not a good thing.  

When you get a tax refund, you are getting it because you have paid more taxes than necessary during the regular tax year. This could be because you had too much money withheld by your employer or, if you’re self-employed, it could be because you overpaid your estimated taxes.

Some people don’t really mind getting a big refund of their own money once a year. They view it as a “bonus” of sorts. If you’re not in that camp, though, and you’d like to see more of your own money throughout the regular working year, talk with your employer or work with a professional accountant to figure out what you can do to pay less in taxes throughout the year. You actually have many options for making this happen.

When Should You Receive Your Refund?

If you’re fine with getting a refund once a year or it’s too late for you to change things for the upcoming tax season, you may be wondering when you can expect your refund.

Obviously, the sooner you file your taxes, the sooner you can get your refund, so make sure you file on time. You can also receive your refund faster if you file online. Generally, people who file taxes online receive their refunds a little over three weeks later. People who file the old-fashioned way, i.e. on paper, generally have to wait a little over six weeks or as long as eight weeks.

Mistakes made in filing can cause delays on these estimates, so make sure to go over your tax forms very carefully before sending them off. Ideally, you should have a professional prepare or at least look over them for you in order to avoid errors.

Hopefully, you now understand the tax refund process a bit better. If you do run into any questions or problems, however, remember that asking a professional for assistance is always your best bet. While these refunds get a good name, however, they are actually not a good thing.

When you get a tax refund, you are getting it because you have paid more taxes than necessary during the regular tax year. This could be because you had too much money withheld by your employer or, if you’re self-employed, it could be because you overpaid your estimated taxes.

Some people don’t really mind getting a big refund of their own money once a year. They view it as a “bonus” of sorts. If you’re not in that camp, though, and you’d like to see more of your own money throughout the regular working year, talk with your employer or work with a professional accountant to figure out what you can do to pay less in taxes throughout the year. You actually have many options for making this happen.

When Should You Receive Your Refund?

If you’re fine with getting a refund once a year or it’s too late for you to change things for the upcoming tax season, you may be wondering when you can expect your refund.

Obviously, the sooner you file your taxes, the sooner you can get your refund, so make sure you file on time. You can also receive your refund faster if you file online. Generally, people who file taxes online receive their refunds a little over three weeks later. People who file the old-fashioned way, i.e. on paper, generally have to wait a little over six weeks or as long as eight weeks.

Mistakes made in filing can cause delays on these estimates, so make sure to go over your tax forms very carefully before sending them off. Ideally, you should have a professional prepare or at least look over them for you in order to avoid errors.

Hopefully, you now understand the tax refund process a bit better. If you do run into any questions or problems, however, remember that asking a professional for assistance is always your best bet.

What to do with Your Tax Refund

When you get a tax refund, especially when you get one for the first time, it’s easy to get excited and to go “spend crazy” buying whatever you want.

And, while it’s okay to splurge a little bit if your refund is large enough, there are actually much smarter things that you could do with your money.    

Here are some ideas.

Pay Down Your Debts

While it may not be fun, one of the smartest things that you can do with the influx of money come refund time is to pay down your debts.

If you have debts you can pay off completely, do it! Even if that’s not possible, just paying as much as you can, particularly on the debts that are affecting you the most negatively, can have a big and majorly positive impact.

A good idea is to comb through your credit report with a financial advisor to determine which debts need the most immediate attention.

Stash Some Emergency Cash

If you’re like most people, your first instinct when you get extra cash is to spend it, but that may not be so smart.

Instead of spending, consider stashing. Whether you save the money as cash or put it in an emergency savings account, it’s good to have some money on-hand for those unexpected situations.

A car that suddenly needs major repairs, for example, is going to set you back some cash, but you won’t feel the blow quite so much if you’ve got some emergency money on hand to cover the costs. Having that “safety net” of money can really keep you from reeling from financial blows when they come.

Invest

Something else you can do with your refund is to invest it. Whether you want to play the stock market, open up a retirement savings account, or try out a new business venture, investing, if you do it wisely, can grow your money.

Before you invest, though, it is always a good idea to speak with a financial professional about your current situation, your future needs and goals, and the best investment options for you and your needs.

As you can see, there are much better things to do with your refund than just blowing it, so try to put these tips into practice. You’ll be thankful you did later on down the road.

What Not To Do With Your Tax Refund

For some people, getting that tax refund is like getting an excuse to go out and waste money. And, while that can be tempting, the truth of the matter is that a tax refund should be used responsibly and in such a way that it will make your financial situation better, not worse. So, with that in mind, here are a few things that you definitely should not spend your tax refund on.   

Don’t Spend it on a Big but Unnecessary Purpose

First things first, don’t do what a lot of people do, which is to go out and finally buy that new television or that new computer they’ve been dying to have. This kind of thing is only going to give you temporary satisfaction, and, once that passes, you’ll be left with nothing. Use your money to benefit your life in a meaningful way, not just to buy something “cool.”

Don’t Just Stick it in the Bank

If you get some extra money from your tax refund and you decide to put a portion of it in savings, that’s great and responsible.

Don’t, however, just stick it in your regular checking account. When you do that, this money has a way of disappearing a little bit at a time, and, before you know it, it’s all gone.

Don’t Use it to Create New Debt

One big mistake that people often make with their tax refund is using it as a down payment on an expensive item, like a car or a boat or a vacation home.

When you do this, all you are doing is creating new debt. Sure, that down payment is taken care of, but now you have to pay on your new item each month!

In short, don’t use your money to give yourself more money problems.

The bottom line is that your tax refund should be used responsibly. Put it in savings. Start a savings if you don’t have one. Pay down debt. Just do something worthwhile and beneficial in the long run, not something that you’re going to regret soon after!

Let Your Tax Refund Help with Holiday Debt

No matter what holidays you celebrate, there is a very good chance that, from about November to January, you spent a little more than you should have. The good news, though, is that, if you play your cards right, there could be a nice tax refund coming for you soon- a refund that you can use to pay down some of your debts and get yourself into a better place post-holidays.   

One of the first steps toward successfully using your refund to pay down holiday-related debts is to ensure that you file your taxes as soon as you possibly can. Work with a tax professional to determine the earliest date that you can file, and then get it done! The sooner you file, the sooner you can use your refund wisely.

Consider E-Filing

In addition to filing your taxes as early as possible, you will also find it helpful to electronically file or to “e-file” your tax returns.

When you do electronic filing, all it takes is a few clicks and a little data input on your part or on the part of your accountant or other financial professional, and you can be well on your way to getting your refund!

Do Use Direct Deposit

Another simple way to ensure the speediest return possible is to choose the direct deposit method when you select how you will receive your return funds.

When you choose this option, you don’t have to wait for the IRS to get around to cutting a check and sending it to you. Instead, as soon as your return is processed and ready, it can immediately be put into your bank account, allowing you to get and (responsibly!) use your money much faster.

As you can see, there are definitely ways to get your return as soon as you possibly can, and doing so, especially with the help of a qualified financial professional, will ensure that you can use that money to pay off any overspending you may have done over the holiday.

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• Tax refund day is here! Sort of. (dontmesswithtaxes.com)

Tips to Remember as You Pay Off Student Loans

Student loans are something that most people will have to deal with at some point in their life. Unless you were lucky enough to get lots of scholarships or to pay for college out of pocket, there’s a good chance you’ve got some student loan debt following you around.   

And, while it can be tempting to just ignore those pesky loan payments, doing so could cause serious problems for you, such as wage garnishment. As such, it’s best to get a repayment plan put together for your loans and then to repay them a little at a time.

Your loans can and will affect your taxes in some ways too, so there are a few tax laws, as they relate to student loans, that you should familiarize yourself with.

Tip #1: Don’t Forget to Deduct Student Loan Interest

You might think that there’s nothing good about having to pay off your loans, but there is at least ONE good thing. You can deduct student loan interest from your taxes. In fact, for 2015, you can write off as much as $2,500 in paid interest. That should provide a pretty nice incentive to keep making those payments!

Tip #2: There are Relief Options…but They’re Often Taxable

If you’re truly swimming in student loan debt, you may want to look into relief options. There are some good ones out there. Teach for America, for example, offers awards that can be used to pay off student loan debt, as do many other programs. Just be aware that some programs offering relief options do not offer tax-free relief options! So, always make sure you know what responsibilities and taxes come with any aid or student loan relief than you receive.

Tip #3: Your Filing Status Matters

As mentioned, most people can deduct student loan interest from their taxes up to a certain amount. However, your filing status may determine whether or not you qualify for this money-saving option. Typically, if spouses are submitting their returns separately, they will not receive this write-off. For that reason, it’s better for married couples to file jointly; that way, they can still receive the deduction or at least part of it if their modified adjusted gross income is not $160,000 or above.

Tip #4: Forgiven Debt May Count as Income

Some people are fortunate enough to find and qualify for programs that forgive some or all of their debt. However, if you’re one of these lucky people, you need to understand that, in most cases, forgiven debt is still taxable; in fact, the IRS tends to treat it like income. However, this is not ALWAYS true; some loan programs are exempt from this taxation. Just make sure you know whether or not you’re required to treat forgiven debt as income under the conditions of your forgiveness program. That way, you won’t find yourself in trouble for monies not paid!

As you can see, student loan debt and taxes are more intertwined than you might think. Consider hiring an accountant or financial adviser to help you develop a plan to pay off your loans and keep your taxes low at the same time!

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• Here's what could happen when you don't pay your student loans (businessinsider.com)

How to Get a Bigger Paycheck

Everyone likes the idea of getting a large tax refund, especially if their income throughout the year is lower than they might like it to be. However, a big tax refund isn’t always a good thing in the long-run and could indicate that you need to be taking more W-4 tax exemptions.  

When you file for more exemptions- which you can do when you first start a new job or later by contacting someone in Human Resources (HR)- you’ll have fewer tax dollars withheld. Filing for more exemptions will inevitably to a reduced tax refund, but, on the upside, it will also lead to larger paychecks throughout the year.

Do be careful, however, to withhold at least the required amount (check your state and personalized guidelines with the IRS and/or your financial advisor, or, if you’re a do-it-yourself type person, use the IRS’ withholdings calculator), or you could face penalties, which would defeat the whole purpose of changing things up.

While it’s nice to get a huge payoff come tax time, most people would prefer to simply have more money on a regular basis and in their day-to-day lives. If that’s you, then follow these “big paycheck tips,” and you should get your desired results.  #BigTaxRefund

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The Income Tax Waiting Game - When To Stop Playing

When you choose to file your income tax online or with the help of an accountant, you are usually given an estimate of how much you can expect to receive in terms of income tax. When that money doesn’t come as quickly as you might hope, however, you may start to worry. You might fear that there was a problem with your return or some other issue. Instead of panicking, know that there are things you can do, other than just waiting it out, to get answers and ease your mind.  

File Correctly

You can eliminate a lot of needless worry ahead of time by making sure you file your tax return correctly and accurately. If you’re filing yourself, resist the temptation to be dishonest. Also check and double-check your forms and records to increase the likelihood of an error-free tax return. When your tax documents are submitted without error, you probably won’t have to wait around on your income tax. And, even if you do, you’ll have an honest conscious and no need to worry.

If your taxes are complicated or you just don’t think you can handle them on your own, hire someone to do it for you. The cost of hiring an accountant is usually nothing compared to the relief of knowing your taxes were done professionally and accurately.

Where’s My Refund?

Once your taxes have been filed, you’re usually given an estimate of when you can expect your tax refund. This is always a rough estimate though so don’t panic if you don’t get your money on the exact estimated date.

Another good reason not to panic is that you can actually track the progress of your refund using the IRS’ Where’s My Refund? feature. The website is updated overnight, so you can check it once a day to find out the status of your refund and when you can expect it.

Potential Witholdings

Barring an error on your return, there are some legitimate reasons that you may not have received your tax refund. Depending on where you live, taxes can be withheld (sometimes permanently) if you owe any of the following:

l  Unpaid child support

l  Past tax debt

l  Student loan debt

l  Unpaid state taxes

If one of these issues is holding up your return, you’ll receive a notification from the IRS. Unfortunately, if your refund isn’t given because of a legitimate withholding reason, there’s really nothing you can do.

When to Stop Waiting

What should you do if you filed correctly, there’s no reason you know of to withhold your taxes, and you still haven’t gotten your refund? Well, first of all, you should keep waiting. The IRS is busy and short-staffed.

You should stop just waiting, however, if you haven’t heard anything about a month or so after you’ve filed. If that happens, check the aforementioned IRS refund tool. If it says your check has been sent, but you haven’t gotten it, request a replacement check.

If it hasn’t been sent and you don’t know why, then you’ll need to contact the IRS directly to find out what the problem (and the hold up!) is. Usually, though, the IRS will have already been in contact with you.

As you can see, Tax refunds can and do get held up, but be patient and take action when necessary, and everything should turn out okay

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Tax Help Tips

More often than not, when people seek tax help, it’s because they want to find a way to increase their tax refunds. Fortunately, just about any qualified tax professional can find a way to help you to do just that.

So, what’s the secret to bigger, more rewarding tax refunds? Well, that really all depends on you and your finances. What will work for you might not work for someone else.  

With that said, however, there are some general tips that can benefit just about anyone. Changing your filing status, for example, can often have good results. Even if you’re married, choosing not to file jointly can sometimes provide a much-needed increase to your refund amount.

You might also consider making more tax deductible contributions during the year. Just a few good contributions can pay off majorly come tax time.

To learn about more situation-specific options to increase your refund, talk to a professional tax preparer for advice.

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