Many people love to get a tax refund. You may look at your refund as a bonus. You might spend the year dreaming of how you will spend your tax refund. Some people consider their tax refund as a sort of forced savings plan. Unfortunately, this forced savings plan pays no interest to you. In fact, you are lending your money to the government over the year, interest free.
It may be time to change your attitude about tax refunds. You should keep your money and make it work for you. You could be paying off debt, or earning interest on that extra money. This year, you may want to adjust the amount of tax coming off your pay cheque. For example, if you had a refund of $1,200 dollars last year, you paid $100 more per month than necessary.
You should talk to your employer about your withholding tax. Often your circumstances change, but your employer continues to deduct the same amount in tax that you specified when you first took the job. If you got married, or bought a house, your tax status has changed. You should revise the amount of money coming off your cheque.
There are other ways to maximize your tax refund. You should make sure you apply for all of the tax credits that are owed to you. The Child Tax Credit and Earned Income Tax credit are two examples. Tax credits are even more valuable than deductions because they come directly off the amount of tax you owe.
Tax deductions may help you reduce your income, so you will be taxed at a lower rate. Tax deductions include alimony, moving expenses, or certain medical costs. Charitable donations are another tax deduction.
You should file your tax return every year. If you owe money, you will face extra interest and charges if you file late. If the government owes you a refund, then you will want to have that money in your bank as soon as possible.
A personal exemption is the money you are allowed to make each year, tax-free. This exemption may vary depending on your tax status. Even if you earned below the exemption rate, you should still file a tax return. You could have tax credits coming to you. A tax refund may pleasantly surprise you.