Final Number Planning

Early returns are in, and this has nothing to do with Iowa or New Hampshire.

We are approximately a month into tax season, though realistically only a couple weeks in considering that many tax forms were not required to be mailed until the end of January. However you want to date it, though, the IRS is seeing a slight dip both in how many returns they have processed and the amount of refund checks given (if you want a few numbers on this, you can read this article).

Worrying about a dip in refunds was a storyline in last year’s tax season, too, as we sought to determine the ramifications of the Tax Cuts and Jobs Act. Really, though, I think this misses the point.

The idea shouldn’t be that filing tax returns is some grand game where you try to get the largest check possible back from the government every year. Many who opt for that strategy often miss the point that these refunds are largely money you’ve already given to the government out of your paycheck. The real number you want to be concerned with is how much you are actually paying in taxes – the money that you are not getting back.

Those big checks feel good because of the number on them. If someone suddenly gives you $2,000, you feel like you can really do something with that money. If someone gives you $77, that feels much less momentous because, well, that’s just an extra dinner out. If you get paid every other week, though, that $77 from each paycheck becomes $2,000 over a year.  Many taxpayers are in a position where the TCJA felt like it didn’t affect them much during the year (for they saw only that modest bump in their paycheck) but then it was a huge shock when the tax return check didn’t come.

If you know yourself, know that you won’t be good at saving that $77, and prefer getting the big check every year, that is okay. There are still adjustments you can make to see that it is taken out of your paycheck. If you didn’t realize how the changes would affect you and now want to develop a savings plan out of your own check every two weeks, that works, too.

Either way, moving forward happens by having information and knowledge. The way to have information and knowledge is not to only think about these things once a year when you get to that final number on your tax return. With forethought and a plan, you can have your money working for you in the way that you want.

If this is something you want to do, let us know. It is early enough in the tax season that we can probably accommodate such a discussion along with your regular tax appointment. And even if you’re not ready for that at this moment, or won’t be getting around to your taxes until closer to the deadline, there is no reason these conversations can’t also happen in May. We are here for you no matter the time.

Warmly,

Josh Bousquet
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