Why Tax Refunds Are For The Financially Uneducated

It’s tax time again and it never ceases to amaze me how many people I speak with who are all excited and in a tizzy because they are getting a tax refund. Tax refunds are only for the financially uneducated and can easily be avoided with a little tax planning.

Let me say that again.

TAX REFUNDS ARE ONLY FOR THE FINANCIALLY UNEDUCATED!!! no-refund

You are probably thinking, “What’s this guy talking about?

Why wouldn’t I want a tax refund?”.

Author’s Note: This post is ONLY for people that want to be financially enlightened and educated and have an open mind. All others will be purposefully offended and called stupid multiple times in this post in an effort to wake them up. So, if you don’t want to be financially enlightened, stop reading now and go melt your brain with some good ole fashioned mind numbing television. I am sure you can find a game show or some “reality” TV to help continue the frontal lobotomy and keep you financially enslaved.

If, on the other hand, you truly want a better life and want to make more money, read on…..

So, what am I talking about?

Here’s the deal, if we are speaking in terms of a tax refund and not a tax credit, it means that you are being refunded money that you OVERPAID and let the IRS have for a year at 0% interest and then you had to pay someone to prepare your tax return to prove that you stupidly overpaid them. Not too smart is it?

Put another way, what if your investment advisor told you that he had a great investment where you could invest your money for a year and when that year was up, you could pay a consultant to prepare a form so you could get your investment back with a whopping 0% return? (Author’s Note: It is actually a minimum of a negative 4% return due to inflation and the erosion of the buying power of the dollar, so you actually lost money).

If your investment advisor told you something that stupid, you would look at him like he was nuts and probably run from his office. At least I hope you would. If you knew someone that took his advice and made that bad investment, you would probably call them stupid. I am not sure there is another word for it. If you are reading this at your office or in a restaurant or crowded place, look left, then look right. You are surrounded by people who subscribe to the bad investment advisor’s “advice”. They are everywhere just waiting for someone like you to help them.

You have heard the term, “adding insult to injury”?

That’s what happens when you pay someone to prepare your tax return so you can get a refund. You are paying them to prove to you and the IRS how financially stupid you really are. I don’t like to pay people to prove that I am financially stupid. I like to pay people to make me more financially educated.

The sad and painful reality is that most of you unknowingly talk to that investment advisor every year and end up investing in that 0% return investment INSTEAD of an investment that actually pays a return OR instead of increasing your monthly cash flow so you could lighten your debt load and stress. The truth is, you could have YOUR money EVERY month instead of paying it to the IRS.

And please don’t be one of those people that tells me, “But I like getting a refund back every year. It is like a forced savings account”. Only stupid, financially undisciplined people think this way. But that’s not you, is it?

And if it is, we are going to work to change that so you can have a better life.

Before we go on, if you are getting a tax refund this year, don’t feel too bad. I used to get them, too. Yes, it is true. I used to be just like you. But then, through large amounts of reading, I became financially educated and enlightened. And that is why I want to share this knowledge with you.

Most people focus on making more money. That’s not a bad thing. The reality is that if you want to have a better quality of life, in addition to focusing on making more money, you have to do what financially educated millionaires and billionaires do. They not only focus on making more money, they also focus on keeping more of the money they make. And you should, too. Financially educated people focus on opportunities to make more money and they educate themselves on how to pay less taxes on the money they make. This is what you have to do also.

Unfortunately, our education system doesn’t teach truly important topics like financial planning, budgeting, how to balance a checkbook, how to minimize taxes, how to start your own company,  how to buy a home, how to negotiate, how to buy a car, etc. It is such a shame that what many people believe to be the greatest educational system on the planet doesn’t prepare its students for real life. As a result, many people live lives of quiet desperation as they meander through life living paycheck to paycheck when wealth and abundance is so readily available for the taking.

Tax Planning

So, to stop the financial bloodletting, here’s what you need to do:

  1. Get with your tax advisor. If they haven’t yet shared this information with you yet, fire them quickly and find another one.
  2. Since it is tax time, it is a great time because you will have all of your documentation and you will have to have someone prepare your returns. Sit down and explain to them that in 2010 you want to adjust your W-4 withholdings so that next year you don’t get a tax refund. Your CPA, tax attorney or tax preparer, with your income and tax documentation in hand, can do a quick calculation to zero out your return. You want this done by your tax preparer because if you aren’t careful, you can end up owing money at the end of the year, and that’s not fun. So, don’t adjust this on your own. Have your tax preparer do it for you.

Here’s the end result:

Once you file your new adjusted W-4 with your employer, you will immediately begin experiencing more money in your take home pay once your company internally processes the form through their payroll provider.

So, right now, you can get a double whammy. You can get your refund from last year AND you can start getting more money in your paycheck. Not a bad deal.

This example obviously uses the assumption that you are getting a refund and that your withholdings have not been maximized to net zero at the end of the year.

Sound illegal? Sound like a violation of IRS tax code? Sound like the IRS boogeymen will come get you if you do this?

Understandable.

For you non-believers, you can check it out for yourself directly on the IRS website. What you are looking for is IRS PUB 919, “How Do I Adjust My Tax Withholding?”

Now, as always when I post information on taxes, federal law requires that I inform you that this post is for illustrative purposes only,  that I am NOT a CPA or tax attorney (and I don’t want to be) , that I am not dispensing tax advice without a license and you should ALWAYS consult a qualified tax professional as it relates to your personal tax situation. With more than 90,000 pages in the current IRS code, only a fool does his own taxes.

If you have questions, please use the comment box below and I will answer them.

Oh, and if you love your friends, family members and co-workers, you need to Tweet or forward this information to them as well so they can begin experiencing more money monthly. You can use the reTweet button at the top of this post or the Share This button at the bottom.

Next up, I am going to show you how to increase your take home pay by $200-$1,000, legally, using a tax strategy usually reserved for home owners with mortgages.

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Comments

  1. ericaedwards1 says

    This is great information. Many people look forward to getting a refund but don’t understand that money can be invested for a better return throughout the year.

    • Vincent Polisi says

      Thank you, Erica! It never ceases to amaze me every year how many people are all jacked up about getting a refund not understanding why they’re getting it in the first place. The level of financial education in the country is truly sad. Be sure to share this post with your peeps to enlighten them to reality.

    • Vincent Polisi says

      Thank you, Joshua! It’s time we woke up America and raised the collective level of financial education so be sure to share this with those you care about.

  2. CliveJeffrey says

    Thank you for posting this article +Vincent Polisi it is very helpful for me since this will be the first time I will be doing a Tax Return since getting USA residency

  3. christophercabacar says

    Quality content for those who want to be on the path of the financially educated. Thanks! And… admittedly I was one of those that looked forward to my tax refund every year drinking the same old kool-aid to convince myself of the very same train of thought, “But I like getting a refund back every year. It is like a forced savings account.”

    Right off the heels of taking a Tax and Asset Protection seminar at the end of 2013 that emphasized the strategy of smart tax planning and wealth building, this post by Vincent certainly reaffirms what is truly going on every year if one does not think about how taxes work and plans smartly keeping the big picture in full view. Put bluntly, the majority of folks including myself have OVERPAID on taxes. Year, after year, after year… More so I am/was but one out of 300+ millions of Americans contributing to vast amounts of interest free loans to the government. /facepalm/ Not anymore, Uncle Sam. Not anymore.

    Why not bring home a bigger take home pay and keep more of it throughout the year? Oh, because there is this shiny big myth gift wrapping around a thing called the annual tax refund. Yay! We get money back every year!! (NOTE: Please check to see if your snark detector is working properly after reading that last line.)

    #VREIA #VincentPolisi #TaxRefundsAreForTheFinanciallyUneducated

    • says

      Thank you. I hate seeing people go through this every year. What makes matters worse is that this year they’ve postponed the filing date because of the fake government shutdown so they’re delaying the refund even longer.

  4. John A. Fletcher says

    As always, Vincent Polisi is a great mentor and educator. Thank you for this very informative and important information.#vincentpolisi

  5. Michael Wedderman says

    Good post #Vincent Polisi. I never looked at it from an investment point of view.

    • says

      Most people don’t, Michael, nor do they understand why they get a refund. When you understand the float that they’re getting on the bulk of funds, you understand the sheer potential for the money and why the IRS enjoys holding it hostage for so long.

  6. JohnCouston says

    As always – good bona fide information and education that flies in the face of “common knowledge” for those willing to actually apply it for their own betterment. I wonder how many people could use some extra cash every month these days.

    • says

      No doubt. If people only understood that they could increase their monthly take home pay and experience a compounding effect or ability to have greater purchasing power due to the dollar’s continual loss of value, things might change. Unfortunately, there is no financial education taught in most schools.

  7. says

    What an insightful article by +Vincent Polisi!
    Everyone who likes getting, or thinks that getting, a tax refund is a
    ‘good practice’ SHOULD read this. Up to you after that if it sinks in
    and you make the necessary changes to make it worth your while!

  8. says

    FYI… Found this deep in the site, thought I’d share, just so there’s no mistake about how to pronounce it from now on!
    What is Disqus?
    Disqus (dis·cuss • dï-sküs’)
    is all about changing the way people think about discussion on the web.
    We’re big believers in the conversations and communities that form on
    blogs and other sites.

  9. tamarapickens says

    So true, but SO many of my friends and family are excited over that “check”. I will be sure to share this article often!

  10. Darrenlgill says

    This is great info Vincent, thanks for posting. Just goes to show you, that so many of us need a perspective shift. The “system” isn’t designed to teach us how to succeed, rather the goal seems to be to mass produce an army of worker bees that think they have now other choice but to live paycheck to paycheck. The more my circle of influence improves, the more I’ve learned just how little I was really taught in school.

  11. says

    +Vincent Polisi speaking the truth. This is only some of the stuff they do not teach the masses in school as they create an army of financially uneducated worker drones.

  12. Cindy Guy Hawkins says

    It appears the IRS really knows how to pull the wool over our eyes.
    Thank you Vincent for sharing.

  13. keshawnfinney says

    Awesome information Vincent. We all need to be more financially educated. It is also very true that the American education system teaches us to be great employees and consumers while not teaching us how to be financially literate and Entrepreneurs.

    • says

      Keshawn, when John D. Rockefeller founded the General Education Board which became what’s known today as the Department of Education, he said, “I don’t want a nation of thinkers. I want a nation of workers.”

      • GregWoolsey says

        From the horse’s mouth! Industrial age education system. Thank God there is at least some magnate programs at some schools.

  14. Richard Adjou says

    This is a great post Vincent, thanks for the information! It’s kind sad that this type of information is not taught in schools. This is great news for those W-2 employees out there, but does this information apply well to W-9 workers?

    • says

      Richard, yes and no. It really depends on how they’re being paid and how they’re filing. Most W-9 subcontractors write down as much as possible to not owe taxes and instead have to pay taxes so they generally don’t get a refund.

  15. Mark Andres says

    +Vincent Polisi, Wow! This was one of the best articles I have read on Taxes to date! I feel that I have an obligation to share this with everyone especially the younger generation. Taxes are our biggest expense and we need to keep learning and how to minimize or eliminate paying taxes through owning a business an investing in assets. The tax code is designed for the rich and so we might as well learn how to minimize our decrease the amount of taxes we pay.

  16. allasibirtseva says

    Great and solid Information, Vincent. I am going to discuss this with my accountant. Gotta take advantage of the knowledge you shared with us! #Vincent Polisi, @vincentpolisi:disqus

  17. says

    I can’t tell you how many times I hear this. “it’s a forced savings account.” I always wanted my money, but too bad I didn’t invest it all more wisely!

  18. Txbest01 says

    Great Article Vincent, I shared with my two adult children for their education! I had to explain this very same thing to them when they got their first real jobs. The HR Person helping my one son most recently actually told him to think of it as a “Savings Account” He quickly corrected her! Luckily he still got the Job!
    #VREIA #VincentPolisi #TaxRefundsAreForTheFinanciallyUneducated

  19. says

    +Vincent Polisi thank you for another great article with eye opening information that I can share with others. I never really looked at it from the standpoint of borrowing the government our money at 0% thanks for the fashwash!

  20. Bobby Rushing Jr says

    Thank you, Vincent, for teaching the masses the truth. And the truth shall set you free!! #FinancialFreedom

  21. says

    Great information +Vincent Polosi. It’s amazing when you see that we are all like Pavlov’s dog. For the most part there is very little information on Finances that we learn growing up. Thank God I found this out when I started doing real estate from my Accountant.

  22. says

    Great article #Vincent Polisi! So manny people do things today, yet they have no idea why they do them nor do they care to understand. They just go about their ways doing what was taught to them, without ever questioning any of it. Love to see when others post eye opening content.

  23. Humbleanger says

    ? How does this play into, or would this be wise to do when you have rental properties, stock, couple of mortgages, and a single owner llc as well as job income?

  24. toddmichaelyoung says

    Great article. I have generally heard this before but have never spelled out in such an easy succinct way as Vincent Polisi does here. #vincent polisi +Vincent Polisi

  25. says

    +Vincent Polisi This is incredible information you discussed and shared. The common man/woman is taught that it’s good to be able to collect money from tax deductions that the government owes them. From what is taught in school, what one learns from their family and the countless commercials from companies that provide tax preparation services, it creates a society that enforces the idea that it’s good to have money with-held, not receive any interest on it, have to pay someone to prepare it and net a negative return in investment.

  26. David Jimenez says

    +Vincent Polisi, I nned a rebuttle to this.
    “But the only problem with this guy’s assumption is that you can easily make it so you don’t get a tax refund and have the minimum fed/state taxes taken out of your check at the same time. To do that, your income would have to be relatively stable and tax law would have to be stable as well to predict what your tax liability will be based on your taxable income and have just enough income taxes withheld from your check over the year to pay for your taxes when you file. But all of this is thrown out the window if your income isn’t stable. For starters, are income isn’t stable from the overtime we will be working so it’s difficult to project out what our total income will be for the year and how much tax liability we will be liable for. For someone who is also self-employed like yourself, it would be difficult because your income goes up and down based on the volume of deals that you close. When you are self-employed, you may have to remit estimated taxes payments throughout the year to avoid owning taxes when you file your return because the income you are paid isn’t taxed like it is when you are employed. Some self-employed individuals send estimated tax payments four times throughout the year to cover their tax liability from income they are receiving that isn’t taxed.
    One other thing, if your estimate is off and you don’t have enough taxes withheld from your income then you could get hit with an underpayment penalty. For ca, if you owe more than 100 they’ll hit you with a penalty and with the feds if you owe more than 1000 then they’ll hit you with a penalty.

    You could use a tax estimator on the irs’s website and the estimator will tell you what your withholdings should be.

    One other thing, if your estimate is off and you don’t have enough taxes withheld from your income then you could get hit with an underpayment penalty. For ca, if you owe more than 100 they’ll hit you with a penalty and with the feds if you owe more than 1000 then they’ll hit you with a penalty.

    I’m going to be stupid and keep getting refunds myself. I don’t want to take the chance of getting his with a penalty for not estimating correctly.

    • David Jimenez says

      This was shared by someone who I work with and we do a ridiculous amount of overtime but it could stop at any point. How much truth is in there and how does it affect me trying to predict my tax liability when I dont have a stable income so I dont get hit with penalties? Any recommendations? Thanks

  27. Alefa Daley says

    Such powerful information.Thank you vincent polisi for this inside information
    “what they dont want you to know about”

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