Every one of us dreads the looming deadline that herald tax day. Each year’s tax returns seem more tedious to deal with than the last. Most professional accountants recommend that tax payers adjust their withholdings and putting the money to immediate use instead while others rely on the government to hold it and help them save up.
Either that or individuals can also opt to making their savings or income tax returns for last year count for the future. Here is how –
Save for Retirement
You have several months of living expenses saved up if your credit is debt free. Individuals who find themselves in such situations can also improve their finances if they put their tax refund check into a Roth IRA.
Pay off Debts
If you have a considerable amount on your tax refund check then it will be a good idea to use it to pay off any high interest credit card debts. This will more than likely give you greater returns as well. You will also be paying less interest in the future once the balance you owe to credit card companies goes down.
Fund Taxable Accounts and Emergency Savings
Use your tax refund to buy shares in stocks or for a mutual fund. If you are fortunate enough to not have any credit card debt you can use the extra cash to bolster your emergency fund up a few notches. Such funds are liable to come in handy especially if an individual happens to lose a job or has to deal with unexpected medical expenses down the road.
Borrowing money from credit card companies would only mean having to deal with high interest rates or paying penalties for late loan payments. An emergency account that has a substantial amount of funds will prevent you from resorting to something like that. For one it will keep your credit score intact. Secondly it won’t jeopardize your retirement savings.
Avoiding Tax Refund Fraud
The Treasury loses as much as $5 billion a year all because of fraudulent tax refund claims. The most common type of fraud on tax returns involves criminals who use social security numbers preferable from people who do not file tax returns.
A fraudster would then withhold vital information and makes up wage before filing for a tax refund through electronic means. This spares him from having to use an actual W2 form thereby making his work easier. A criminal would then claim tax credits and wait for the refund to follow through. In order to make sure that you are never on the receiving end, make sure that you go through the proper tax filing features specified by the IRA.
These options might not be as tempting as planning a trip to Maui with the family or buying a new station wagon. However, they are enough to give you the financial security you need pull through in case of an emergency. Tax day does not always have to be a burdensome prospect especially if you are in for a hefty tax refund on your tax returns this year.
For more information about tax returns, tax preparation Kissimmee or any other tax services in Kissimmee Orlando, please contact us at 407-344-1012.