Tax Returns

I had my taxes done today.  I was expecting a rather small return because I had adjusted my W-4 so that the taxes withheld from my paycheck each week would cover my tax liability.  It doesn’t make sense to be giving the government a tax free loan when I could be applying that money somewhere else which would benefit me.

Despite having made this calculation almost perfectly, I ended up recieving a large refund.  It seems that my tax preparer from years prior had not given me a proper education credit and therefore I was eligible for that.  Another unexpected bonus was a new tax break for students who attended college in an area which had been affected by natural disasters in 2008.  Combining my credit and the tax break, I came out far ahead of what I had anticipated.

As an aside, even if you are getting your taxes done by a professional, it is crucial that you understand all of the credits and tax breaks for which you may be eligible.  It is pretty easy for most people to spend a couple of hours researching tax topics which are relevant to their situation.  Find out what you are eligible for and be sure that you mention it to your tax preparer.  Since tax laws change with the wind, they may not have a clue.

What are my plans for my tax refund? 

First I will rebuild my savings.  My savings account took a huge dent in the last month due to some large purchases.  Getting that cushion built back up is my first priority.  I am uncomfortable not having money in savings and it is hanging over me like a black cloud.  Having a bit of money just in case gives me a sense of security.

Next I will take my car into the shop and have the tires replaced.  I’ve been pushing my luck on the tires I have now.  I probably should have had them replaced months ago but never did, I kept putting it off.  While I’m having my tires replaced I will have the mechanic inspect my brakes and anything else that may need attention.  It is better to catch a problem early before it turns into a complete disaster.

The money that is left over after having my car taken care of will go directly towards my car loan.  Having my car paid off is my next big financial endeavor.  Hopefully I can get most of it taken care of by the end of the summer before we move, and this will make a huge difference.

As you can see, I won’t be going out and blowing my money on unnecessary things.  I’d encourage everyone to use their refunds to improve their financial situations instead of throwing this money away on expensive electronics or gadgets.  I know it can be hard to resist temptation, but a tax refund is a good opportunity to get yourself back on track financially.