Why a Big Tax Refund Costs you Money

March 29, 2017

While receiving a big tax refund at the end of the year is a great present, did you know it actually costs you money? It’s true! Here is why a big tax refund costs you money.

Tax Exemptions

When you structure how your taxes are taken out of your paycheck, you add up what are called tax exemptions. Your total tax exemptions help to determine the amount of taxes taken out of your paycheck each month: the more exemptions, the less taxes taken out.

So, if at the end of the year, you are receiving a tax return of something like $3,000 you can most likely increase your exemptions by 1 to increase the amount of money you receive in your paycheck each month. For help with determining the right amount of exemptions, give your Florida tax accountant a call.

Put that Money to Work

So, now that you’ve reduced your tax exemptions and are receiving more money throughout the year, what should you do with it? We strongly recommend you simply calculate what the monthly increase is in your paycheck.

Now, take this extra money, and put it into a banking or investment account. In other words, put that money to work so it can build interest for you. This will lead to more money in the long-run. The alternative is letting the government keep that money, and it not building up any interest for you.

Why you should Hire a trusted Florida Tax Accountant

Believe it or not, this is actually a very good reason to hire a tax accountant in Florida that you can trust. Most people base their tax accountant’s worth off of how much they can give you in your tax return. Well, what if we told you this shouldn’t be the case? A tax accountant could make it so you’re paying more in taxes on your paycheck throughout the year for that tax season “gift”.

For this reason, it’s important to work with a trusted Florida tax CPA who will be able to help advise you to not only get you the most in your tax return, but also advise you on ways to receive more money throughout the year.

Relate CPA is a Florida personal and business tax accountant whose aim is to get you the best possible outcome for your taxes, whether that be a larger tax return or to help you in paying less out of your paycheck. For more information, give Relate CPA a call today at 352-720-0321 or fill out the form on our website, today!