If you are expecting a tax refund, you might consider investing your refund or using it to increase your financial security. While everyone’s needs are different, here are some optional uses of your refund that may work for you.
Tax Refund Tips
- Contribute your refund to your employer’s 401(k) plan. If your employer offers a matching contribution, that’s an immediate return on your money in addition to deferring taxes on your contribution. And, funds in the plan grow free of tax until withdrawal.
- Use your refund to pay down credit card balances – you’ll earn a guaranteed double-digit return.
- Consider investing your refund in your child’s education. Both Section 529 college savings plans and education savings accounts offer tax-advantaged ways to save for college costs.
- Take full advantage of your IRA options for retirement savings. Both Traditional and Roth IRAs are great ways to save for retirement.
- If you’ve maximized your retirement and education savings, and your credit cards are under control, put your refund in diversified investments that make sense for your age and financial situation.
- Ask yourself if getting a big refund every year is a smart idea. Would you rather invest your money during the year instead of making an interest-free loan to the government? If so, consider filing an updated Form W-4 with your employer.
Contact our office if you have questions about getting more out of your tax refund.
Can Bartering be an Effective Business Strategy?
Have you ever thought about bartering as a way to get the goods and services you need for your business? A growing number of businesses are finding ways to use the bartering system as a means to avoid using up their company’s cash.
A simple bartering arrangement involves two parties trading items of similar value.
For example, let’s say your business owns a building located next to a telephone company. An Internet service provider might be interested in storing its services in an unused portion of your basement. Instead of paying rent, they offer to provide you with a high-speed internet connection and website.
Complicated bartering may now take place through bartering clubs that give members credits for items or services they contribute.
Members can then use the credits to pay for goods or services offered by other club members. This service offers a convenience to businesses, as it can be difficult to find the businesses that offer what you are looking for when searching on your own.
It’s important to note that there are income tax consequences to bartering. To be safe, view your trades as if cash changed hands, since the goods and services are valued for tax purposes at their fair market values and taxed accordingly.
Also, a bartering arrangement does not always result in a deduction immediately equal to the income you recognized. You might provide a service and recognize income immediately in exchange for some equipment you will end up depreciating over several years.
Please call us if you need more information about implementing bartering as a strategy to help your business.