Making the Most of Your Tax Refund
Now that the 2021 tax season has officially wrapped, you might be feeling a mix of emotions.
Tax season can be a time of great uncertainty and, once you’ve filed, you may be wondering how soon you can expect your return, how to make the most of it, or if you did everything you could to maximize your return.
The good news is, that we’re here to help you navigate the end of this year’s tax season and help you begin looking ahead to next year more confidently. We’ve spoken before about how tax planning is critical to your long-term success, and we believe being strategic about your tax refund is no different.
You Cannot Expedite Your Tax Refund
Before we talk about how to best use your tax refund, let’s answer the most commonly asked question we get around tax returns: “When will I receive my refund, and can I expedite the process?”
The short answer is: It depends, and no.
The easiest way to track your federal return is by utilizing the Where Is My Refund? tool through the IRS website. Most state tax agencies provide a similar tool to track your state refund.
Keep in mind it could take up to 21 days for your tax return to be delivered to you.
Again, there is no way to speed up the delivery of your return. Here are a few misconceptions that crop up this time of year:
Getting in touch with the IRS or a tax professional won’t move you to the front of the line. Contacting the IRS or the person who helped you file won’t provide more accurate information than the aforementioned tracking tool.
Different tax seasons don’t impact your return. If you didn’t file your tax return last year but met the deadline for this year or adjusted your tax withholding this year, it will not impact your current return date or amount.
If your refund status is different than expected, there isn’t necessarily a problem with your taxes. If you’ve checked your refund status on the IRS site and the information provided is different from what you expected, there could be a few simple explanations. Rest assured that if needed, the IRS will contact you with more information and next steps.
3 Ways To Maximize Your Tax Return
Now on to the fun stuff: how to make the most of your money! There are a few solid strategies you can employ to leverage your return and bolster your long-term financial health.
While booking a vacation or splurging on a big-ticket item might be tempting, consider these options instead.
Build Up Your Emergency Fund
An emergency fund may not be the most exciting way to use your extra cash, but we recommend building up an account that can cover 3-6 months of expenses, in case of emergency. We promise that you will not regret doing so.
Invest in Your Retirement
Stashing your return money in a 401(k) or IRA is a wise choice with many benefits. The money will grow and be there later on when you need it—and contributions to these funds can benefit next year’s tax return, too!
Work Toward Future Goals
Saving for your child’s college education is another smart (and tax-deductible!) method. You might also consider setting aside money to purchase a home or reaching for goals like expanding your business.
Work With a Professional To Cover Your Bases
Setting yourself up for success for next year’s tax season starts now. Working with a professional accountant ensures you not only get the highest return possible but that you also receive guidance on how to make the most of your money.
If you’re ready to get started, Modis Advisors is here to help. We specialize in guiding startups and small-to-medium-sized businesses as they manage and grow their companies. Reach out to us to learn more.