Eye on Your Money: April 23, 2007

April 23, 2007

by Bryce Matteson

With the exception of extensions, most of us have filed our tax returns for last year. Are you getting a refund and if so, is that a good deal?

The question is best answered with another questio: Are you using your money that's being refunded back to you as wisely as possible? Have you ever put on a coat you haven't worn in quite some time and were surprised to find a dollar bill in one of its pockets? There's something exciting about finding lost money. Sometimes we take it as a sign that things are going our way and we become more carefree with this re-discovered money and the way we eventually spend it. There are a lot of us who get refunds.

According to the Internal Revenue Service, more than 56-million Americans received a refund on their income taxes last year. The IRS goes on to say the dollar amount of refunds is growing. The average in 2005, according to the tax service was $2,500 dollars -- about $100 dollars more than 2004.

So is getting a tax refund in that amount a good deal or not? Certainly we like the money but here's the deal. That money we're getting back has been sitting for some time in Uncle Sam's pocket rather than ours. Think about it this way; would you hand your friend $2,500 dollar and ask them to give it back in a year without interest? The question we have to ask ourselves is are there not better ways this money could be used like paying down credit card debt or investing for a child's college education or your own retirement?

The goal is to reach tax time receiving only a small refund or owing just a little in taxes. For that to happen, we want to make sure we're not having too much or too little without from our paychecks for taxes. It might not be a bad idea to talk to your tax advisor or use a tax-withholding calculator found online to make sure the proper amount is being withheld. You might miss out on that feeling of getting a big refund next year but you can feel better knowing you probably used your money wiser.

Please remember, neither Oppenheimer & Co. Inc. nor Bryce Matteson provide tax or legal advice. Again, consult with your tax advisor or attorney for such guidance.

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