What will you do with your tax refund?
By Stew
A couple of weeks ago, I asked, Should a believer contribute to IRA’s, 401K’s or other retirement accounts? The post generated some interesting comments and discussion. While I still think that some form of retirement savings is a good idea, my financial focus was challenged by that thought: Am I really storing up treasure in heaven? Or am I focused on comfortable life here on earth?
This weekend, I finished the bulk of my tax work. I have just about all of the numbers entered and I am waiting for a few documents to arrive before I submit my final filing through Turbo Tax. It looks like I am going to get a pretty nice refund. I’m not crazy about our government sending all kinds of cash to people like me who are going to get more money back than they paid in the first place, but I accept it as a fact of our country.
You see, we are in a financial situation where we depend on our tax refund, again, I wish that was not the case, but this year, that money will go toward paying off the final portion of my school loans and the rest of a 0% introductory APR balance transfer that is about to expire in March. Every year we get closer to balancing our budget without that tax refund – this year will be the closest that we have come to that point. Most years, our refund money is spent before it is direct deposited in my checking account, but I started thinking: what I would do if I could balance my books without that influx of cash every March?
You know what I wish I could do? I would like to my tax refund to my church. Think about it – it is a painless donation, all I have to do is file my taxes. If we could live within our annual income, I could make a charitable donation with my tax refund! Since tax refunds do not count toward annual taxable income, the donation would provide a major deduction on next year’s taxes. I have a number of friends who are getting refunds in the amounts of$4,000 to $6,000 – that is major money.
Now, I prefer to give most of my charitable donations to my church. I am confident that the money is being used wisely and according to the budget. I am certain that funds given to my church will be used in a God-honoring way. You might not have the same confidence in your church – I would ask, then why are you attending there? But if your are not comfortable with a church donation, maybe choose a charity that you are excited about.
I know, the temptation to use free money for retirement or to add to one’s savings account is strong. I know of a lot of people who use their tax refund for stuff like flat screen televisions or an extra vacation or a down payment on a car or an Xbox or a Wii – yikes! God has promised to meet our needs and if He has met your needs, maybe your tax refund is something that He could use to meet the needs of your neighbor.
(If your income level is such that you do not qualify for a tax refund, I want to thank you for the donation that you have given the rest of us.)
Article by Stew
Photo by diametrik
February 8th, 2010 at 7:21 am
In a way I am giving my entire tax refund to a church. My son goes to Catholic school and his tuition is ~$5600 a year. My tax return is ~$6500; so almost the entire return is going to his tuition. After buying new uniforms (~$500) and school activity fees (~$150), I will have $100 left. I wish that I could send my kid to the local public school, but their performance is abysmal and kids from rough neighborhoods are bused in from four other townships b/c property taxes in my town provide a high revenue stream for our town’s school. So in a way, I feel like I am contributing my entire tax refund to a church. I know it isn’t what you had in mind though. :-\
February 8th, 2010 at 7:24 am
I think you have hit the mark on this one. We should be putting our money towards eternal goals. We split our tax refund between DH’s college (he’s going to school to be a pastor) and our annual tithe.
February 8th, 2010 at 12:46 pm
Beyond the people who have all of their income tax refunded, income level has nothing to do with “qualifying” for a refund. It just has to do with whether you under- or over-withhold during the year. Bill Gates could get a tax refund if he wanted to.
February 8th, 2010 at 1:05 pm
I take exception to your description of my tax dollars being used as “charity” so that you are able to get more than you contribute. I call it theft (not by you…by our government). It’s not charity when it is forced. It’s welfare in the form of a “refund”. Except that a true refund would be money you’ve actually sent out and are getting back that belonged to you in the first place. Instead, you are getting someone else’s money because of the way the system is rigged. It’s wrong.
We’ll probably owe money again this year, even though we do not make a lot of money. We choose to not loan the gov’t our taxes during the year and keep as much as we can from our paychecks. So many people think of their “refund” as found money (in your case, yes, it is…money you did not earn and never had before) but in reality, for most, it is THEIR money to begin with and they have lent it to the government interest free. So we keep as much as we can and then send in our taxes lump sump when due. That way we get to invest, save, or give our money as we see fit.
I’m going to go write about this now on my other blog because this issue really riles me up.
February 8th, 2010 at 1:12 pm
Courtney, I do not withhold any taxes during the year, yet I still get “refund”. If Bill Gates did not withhold any taxes during the year, he would not get a refund. Income level is certainly a factor and castocreations is correct in saying that many of us below a certain income level are getting money that did not belong to us in the first place.
February 8th, 2010 at 1:16 pm
Thank-you for bringing to light that there are some financially responsible people that depend on having a tax refund. Year after year I’m riddled with guilt that I have a tax refund. I get slammed every year at this time reading ariticles that remind me how irresponsible I am for giving an interest free loan to the government. I do a little moonlighting (1099 work), and one year I under-estimated my tax obligation and it cost me over a thousand dollars (which I wasn’t prepared for and I had to pay my taxes with a credit card). So now I have extra money taken out with my W2 work to compensate for the taxes needed for this 1099 work and always end up with a buffer left over in the form of a refund. It was nice to see someone else, whom I have respected financially, also depend on their tax refunds.
February 8th, 2010 at 1:18 pm
Pitztop, unfortunately we are all being conditioned to depend on government “generosity” more and more. If we have a decent 2010, we may not need our refund . . .
February 8th, 2010 at 1:21 pm
I put my $300 in my emergency fund. And I sent in an extra car payment. 6 more to go and the car payment is done. Finally.
February 8th, 2010 at 2:13 pm
I don’t understand your last line. You refer to ‘the rest of us’ as if most people reading this are in fact getting a refund above what they’ve paid in taxes. I don’t believe that’s true is it? Surely only a small percentage of tax payers are in that category. The vast majority of tax payers, do in fact, pay taxes to some extent with little or no refund. I’d submit that this article can really only target a small percentage of readers. And the true ‘rest of us’ either owe taxes at tax time, or are getting refunds because we have over-withheld. In that case, that refund is still our money begin refunded to us. It’s not found money, it still has a purpose, but admittedly, most people don’t actually plan for anything tax related.
February 8th, 2010 at 2:16 pm
Stew, you’re not talking about a “refund” – you are talking about a “credit.” I assume you mean the Earned Income Credit (?), although there are others. A refund is money paid back to you out of the taxes you had withheld during the year, because you withheld too much. Anyone can get a refund if they set up their W4 to over-withhold, regardless of their income level.
February 8th, 2010 at 2:21 pm
Infinion…as I understand it (and I don’t have exact figures) it’s actually nearing 50% of tax payers who pay NO income taxes! Which means that there are a lot of ‘us’ who do pay income taxes subsidizing those who are getting free money that never belonged to them in the first place.
I agree with you that those who do get a true refund are not getting found money…it is their own money. But there are more and more people who are getting “free” money in the guise of a refund.
February 8th, 2010 at 2:25 pm
Castocreations – not everyone who ultimately pays $0 in income taxes also gets money credited to them in excess of their refund. But I do agree that the 50% of us who are paying taxes are subsidizing the country for other half. You’re all welcome :-)
February 8th, 2010 at 3:09 pm
Courtney, you are correct, I was using “refund” in the general sense – certainly tax credits are a part of that number.
Infinion, the term “rest of us” does not imply a percentage, small or large. However, as a few more comments have pointed out, there is a huge number of people who earn a living in this country, but pay no taxes at all.
BTW, tax credits are also funded by other tax payers. They are a compelled “gift”.
February 8th, 2010 at 5:43 pm
40% have a negative “effect” income tax rate
http://biggovernment.com/dmitchell/2010/02/08/political-alchemy-part-i-turning-spending-increases-into-tax-cuts/
February 9th, 2010 at 9:20 am
I think the government won’t do such thing, even though some our taxes are too much. All supply now has always been attached by a tax. also having Credit Cards no scape. If the government will refund our tax, you think they can afford?
February 9th, 2010 at 12:19 pm
We will use all of our refund to pay down debt (refund is less than $1k). Then once we are out of debt, I will be able to increase our tithe to 10% (I’m only giving 5% right now). I am also a member of my church’s finance committee so I know exactly where the money is spent.
Since we cannot donate all of it to a worthy cause, I do feel like we (in a way) “depend” on it. Gosh, I cannot even imagine being able to give all of it to my church or some other charity. THAT WOULD FEEL AWESOME!
February 9th, 2010 at 12:47 pm
Gina, it is a goal of mine . . . we are really trying to cut out unnecessary spending so that we will have more money to give.
February 10th, 2010 at 9:41 pm
There are lots of things to do with our tax refund. Pay down credit card debt, Open an IRA, Take stock, Set up a rainy day fund, Refinance your house, Add to your mortgage payment,Spruce up the homestead, Auto details, details, details,Service your car
and Get the star treatment..
February 12th, 2010 at 10:23 pm
It is ridiculous how much we get back year after year for the kids, but I won’t complain. This year, like most years, it will be used to pay off bills. The good news is after this year will be very close to being debt free :)