Time to begin work on 2009 tax returns of-course was about a year ago. Yes, that is right. The planning should have been started at the beginning of the tax year and not at the end because you don't want to be under-withheld and potentially pay penalties. You also don't want to have paid the government too much during the year and get a large refund.
Why not a large refund?
The argument you always hear is that you have given the government an interest-free loan of your money that you could have earned the interest. Well, let's see, over a year a $2,400 refund for example would have probably saved you an additional $12 in interest (if kept in a safe money market) or could have cost you nearly $500 if you had dollar-cost averaged into a retirement stock fund. But that is only a 1-year return and not fair.
No, the real reason to avoid a large refund is that you think of it as a "windfall" and you may, indeed, spend it. You may end up neither saving it nor investing it and lose all around. Adjust your W4 form online at http://www.irs.gov/ or better yet see a financial planner to get an even more accurate picture of next year's tax liability.
An Introduction
Hi. Welcome to BourGroup and my blog. Phil
Phil Bour is a CERTIFIED FINANCIAL PLANNER(tm) professional since 2004, a Magna Cum Laude college graduate and an accounting professional for over 35+ years. I love numbers, statistics and economic history.
I am also an Enrolled Agent (EA) to represent taxpayers before the Internal Revenue Service and to prepare tax returns.
"Phil"osophy: I believe that you can manage your money on your own (not necessarily through individual stock selection but through mutual funds, ETF's and other solutions) once you receive some one-time, professional guidance. Why pay annual fees when there may be little added value? For additional information, first read the "An Introduction" label at the left. Then move on to others.
Phil Bour is a CERTIFIED FINANCIAL PLANNER(tm) professional since 2004, a Magna Cum Laude college graduate and an accounting professional for over 35+ years. I love numbers, statistics and economic history.
I am also an Enrolled Agent (EA) to represent taxpayers before the Internal Revenue Service and to prepare tax returns.
"Phil"osophy: I believe that you can manage your money on your own (not necessarily through individual stock selection but through mutual funds, ETF's and other solutions) once you receive some one-time, professional guidance. Why pay annual fees when there may be little added value? For additional information, first read the "An Introduction" label at the left. Then move on to others.