Receiving a big tax refund is madness because it basically involves giving money each week for an entire year with no interest paid on it," said Eleanor Blayney, [CFP®,] consumer advocate for the Certified Financial Planner Board of Standards in Washington.
People who think a refund is some sort of financial planning because they avoid paying a tax bill with their return are totally wrong, she asserted. They don't realize that they are simply leaving money on account with the U.S. Treasury. If, on the other hand, you owed an extremely large sum that you found difficult to pay, you should increase your withholding at work.
Your return can help determine whether tax-free or taxable investments make the most sense to your bottom line. You must determine the right answer for you and your holdings.
"Look at the return to see if you're holding municipal bonds and, if so, if you're getting adequate value from them," advised Blayney. "The yield on tax-exempt vehicles is not that great, and you might be better off going with a taxable bond instead." Read more >
March 6, 2011