There is legally no way you can underpay taxes and get away with it. Making an underpayment often means penalties and imprisonment if you take it too farther. Uncle Sam has never pardoned those who tried cheating him. To be on the safe side, most law abiding citizens pay up their taxes, albeit a little more than the theoretical calculation and get back a refund, but without any interest on the principal. You may not mind about the interest, but you should be happy that you at least get it at the end of the term. If it is small, it hardly matters how you spend the refund, but if it is big enough you can make a successful investment in many different ways and see your money grow.
Here are some venues (and ideas) you can try.
1. Top on the list and the most preferred way to channelize your tax refund is to clear off a debt that has been costing you a lot. You can consider prepaying a payday loan or a personal loan you took to meet emergency expenditures. But before you do that, ensure that your lender will give you substantial rebate for prepaying. Remember that some lenders don’t like to get their money back faster than they want.
2. Paying off your credit card dues is another way in which you can save substantial amount. Recollect that your money when it was with Uncle Sam did not work for you. It meant idle investment. Now, therefore, is the time to make it work harder. Interest on credit card can be as high as 24 or more percent if you had borrowed cash against it. Repaying that debt almost amounts to earning the interest you have been losing.
3. Use the tax refund to buy an insurance plan. You can always find some plans that will let you make a onetime investment and give you cover for a fixed period. The other advantage of an insurance based investment is that you may possibly quality to receive more tax rebates for the following year.
4. If you know of someone, of course someone you trust and know well, and has substantial debt you can help him or her get out of the debt by lending money for a fixed period at a predetermined rate. The usual return you can expect to get will be much higher than the normal rates giving you better returns than usual.
5. Make it habit to invest all your refund money into an account and transfer it to a retirement plan. Retirement plans usual offer better rates of return over long periods of investment. If you are not averse to taking a little bit of risk, then go for mutual funds. Though riskier than retirement funds, mutual funds grow faster, but don’t forget, does the attendant risk.
6. Making investment on your kid’s education can be a very usual investment. But for this saving plan to be useful you need to be regular by apportioning the refund to a separate account with long term gestation period. If you are in doubt about what plan to choose, talk to an insurance advisor. You can always find one tailor-made for you.
7. If you are wealthy and toward the end of your life, then why not consider giving the money to charities? Donations to charities will qualify you for tax rebates. Another thing you can do is put away the money into a non-checking account in a bank. Not only do they provide the much needed security in old age, but they can also pay for hospital expenses.
I'm Louida from Atlanta, Georgia and I'm a mother of two daughters, blogger, and full time working mom at a Business Consulting Firm.
I love helping others learn how to start working from home on the internet free to supplement their current income.
I also blog at Productreviewmom.com
Subscribe to newsletter
Grab my Badge