How Big Is Your Tax Refund?

There is a familiar buzz in the air this time of year. Some anxiously awaiting their tax refund, others wondering why the heck they aren’t getting a tax refund at all. Even worse, some shocked by the news of a big fat tax bill they weren’t expecting. We all start to believe, or at the very least wonder, if an effective tax strategy is determined by the answer to this one question - “how big is your tax refund?”

The value of an effective tax strategy is NOT measured by the size of your refund by any means. Here are a few items to consider as you measure the value of your tax accountant and evaluate the effectiveness of your current tax strategy:

• How much tax did I really pay, regardless of the size of my refund?
• Was my big refund due to the fact that I loaned the government interest free money for the last 12 months?
• Did my tax accountant capture all the proper deductions and available credits to minimize my total tax?
• Do I know my marginal tax rate? In other words, if I make an extra $1,000, how much is truly mine to keep after taxes? Better yet, is there a way to keep more of it?
• Do I know what I can do throughout the year to maximize my own wealth and earnings potential?
• As a business owner, am I taking money out of my business in the lowest tax rate possible?

The true value of your tax accountant and tax strategy lies in minimizing your overall tax burden and understanding what you can do to keep more money in your pocket. An effective tax strategy must be identified and implemented long before a tax return is due.

So, the next time you are tempted to use the “how big is your tax refund” question as your measuring stick, remember there are much more important questions to consider and adjustments to be made.