Updated: Feb 3
When most people think of Tax Season, excitement normally isn’t the first word that comes to mind. But depending on your financial situation, it can be something to look forward to. This is because tax refunds are one of the greatest Windfalls™ you can anticipate during the calendar year. Whether you’ve been following me for a while, or if you’re new to LiftOff Your Finances™, I think it’s helpful to reiterate this key financial principle.
A Windfall™, by my definition, is a way to describe any “unexpected” money that comes your way. This includes any money that you obtain outside of your scheduled paychecks. The awesome news is that we all receive windfalls from time to time, and tax refunds fit within that category because you can’t always determine the exact amount that you’ll receive. But a windfall is only useful to you if you resist the urge to spend it immediately, and instead set it aside until you have time to think through your financial priorities and assign a purpose for that “unexpected” money. Read more about windfalls here.
To ensure you get the greatest tax refund windfall this year, here are a few quick tips:
Avoid procrastination - Remember, the sooner you file your taxes, the faster you can receive your tax refund.
Don’t forget to claim any tax deductions that you might be eligible for - Common deductions that people often overlook are for home mortgage interest, charitable donations of money or personal items (to church, the Goodwill, Habitat for Humanity or similar organizations), the Lifetime Learning Credit and more. I’ve included a link to several deductions that might apply to you.
Pay your tax preparation fees directly - Oftentimes if you’re using tax preparation software, you’ll be asked if you want to pay for the fees with your debit or credit card, or if you prefer to have the fees taken out of your refund. The problem with the second approach is that additional fees are also taken out for this “convenience service.” I vote for taking two minutes of your time and paying with your normal debit or credit card (if you are able) so you can receive every single dollar of your tax refund.
Opt for direct deposit to receive your refund - If you have an eligible bank account, this will be a faster way to receive your refund than through the mail or through a special refund debit card that is sometimes offered on some tax preparer sites. And guess what - the refund debit card option comes with additional fees! So while you may not want the IRS "in your business" so to speak, it’s not worth delaying your refund or receiving extra fees just to receive your money outside of your normal bank account.
Pray for wisdom on how to use that tax refund - As I mentioned, since tax refunds are one of the greatest windfalls that many of us will receive this year, we want to be thoughtful about how we use them.
I hope these tips will encourage you to file your taxes asap, if you haven’t already. I’d also love to hear how you’re choosing to use this very valuable windfall this year. For me, I plan to use my tax refund windfall to help support additional programming for LiftOff Your Finances™. Email me at Tamara@myliftoff.net to share your thoughts and ideas with me.