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It's a Refund!
Deciding What to Do with Your Tax Check
By Mark Stackpole
April 15. Few dates on the calendar inspire more negative emotion. Whether it's anxiety about getting the numbers right and avoiding the wrath of the IRS or frustration at seeing how much of your yearly income has ended up somewhere other than your bank account, Tax Day is sort of like the opposite of Christmas.
Of course, the less you owe, the lighter your mood. Those who break even, or end up owing just a little bit, feel the same as those people who narrowly avoid a car accident – they might not feel great, but they know it could have been a whole lot worse.
And to those who are lucky enough to be getting some money back, it feels vaguely like a lottery victory, even though the money they are "winning" is actually their own. For those folks, the issue becomes how to make the most of that elusive refund: Smart financial investments? Reduction of credit card debt? Or maybe a hastily planned family trip to Hawaii?
Eva Rosenberg is a tax professional, author of Small Business Taxes Made Easy (McGraw-Hill, 2004), syndicated tax columnist and publisher of TaxMama.com. Rosenberg thinks people need to keep a variety of factors in mind when they make decisions about their tax refunds. "Sometimes, just sometimes, spending it on something ridiculous is the best idea of all," she says. "If you can find something that you and your family really enjoy, buy an annual pass. It will end up saving you a ton of money. Look around for whatever is close to you and fun (movie theaters, theme parks, miniature golf, museums and zoos)."
As tempting as the fun stuff is, many families are probably facing more immediate financial concerns. For them, Rosenberg recommends a slightly more conservative approach such as opening up an IRA account or settling up with the credit card company. "The Tax Mama always tells clients who have debts to use the biggest part of that refund toward paying off your debt," she says. "But save part of it to reward yourself for being frugal enough all year to have saved that much money out of your paycheck."
