Tax Season Is Upon Us
It’s tax season. Yippie!
(That was a touch sarcasm if you didn’t catch the tone of my writing voice.)
I recently finished doing all my family’s tax forms. I don’t really enjoy doing my taxes, but who does? This is mainly because I’m either really close to receiving a small refund or owing a ton of money. You see, I have the awesome privilege and responsibility of paying quarterly estimated taxes due to my status as an ordained minister.
My income taxes are not deducted from my paycheck each month, and I like it this way.
(And now, I probably just painted a bullseye on myself for an IRS audit.)
What this means for me, though, is that I need to plan, budget and save accordingly, so that I can pay my federal and state quarterly estimated taxes on April 15, June 15, September 15, and January 15.
In paying my income taxes this way, I experience the financial “pain” of my taxes. Most people don’t experience this same pain due to tax withholding from each paycheck. Believe me, it’s a totally different experience. The government knows and understands this, too. They don’t want the majority of the population to feel this kind of tax pain.
For 2013, I messed up my tax calculations for a couple of different reasons. Now, I owe a substantial amount to Uncle Sam next week.
While I’m not thrilled with the thought of having to pay a substantial amount of money in addition to what I’ve already paid, I am okay with it.
And why in the world would I be okay with owing the government a bunch of money? Because I have a different tax season financial mindset than your average American.
Two Different Tax Season Mindsets
Poor and lower middle class families typically file early in the tax season.
Why do they file early? I believe this is due to the fact that poorer people tend to view tax season as an opportunity to “make money.” They have structured their withholding as such that they have been enrolled in a one-year forced money-saving program.
The funny thing, though, is that they have essentially loaned their money interest-free to the government for a whole year. They lost the opportunity of using that money for an entire year.
The poor usually have regular income from only one or two jobs. Their tax forms are relatively clean and simple. They can fill out the forms quickly and begin the process of getting their money back.
The sad reality is that the majority of Americans who receive refunds have no real strategic plan for this money once they get it back from the government. They tend to go spend it on stuff that they probably don’t even need, and then the cycle begins anew for another year.
On the other hand, wealthier individuals and families typically file as close to April 15 as possible.
So, why would rich people choose to file so close to the deadline? Probably due to the fact that they feel the pain more of paying taxes. Their tax forms are more complicated. They have a variety of income streams. They have investments. They own a small business. They have more of a producer mindset rather than a consumer one. They understand the value of every dollar they earn.
Rich people definitely experience the pain of paying taxes at a deeper level than poorer people.
And, I wonder what would happen if poorer families had to pay their taxes like wealthier families? My guess is that we would probably experience a tax revolution in this country!
Here are some thoughts on how we can all shift our financial mindsets during tax season.
5 Ways To Shift Our Tax Season Mindsets
- Consider tax strategy in your overall budget process. I know when I plan my monthly budget, I want the largest amount of monthly net income in order to leverage what I need leveraged in my family finances, such as debt reduction, savings, and investing.
- Give the government exactly what it deserves. No more and no less. Yes, we should pay our taxes. As Christians, we need to be obedient to the laws of the land. But, handing additional money over to the government for them to use interest free for a whole year is not wise stewardship.
- Structure tax withholding and payments for equilibrium. You don’t want to owe, but you also don’t want to receive a massive refund, either. Consider meeting with a tax advisor or financial planner to achieve this tax equilibrium.
- Start some type of small side business and see your taxes and tax forms become more complicated. If your business is even moderately successful, you will need to pay estimated quarterly taxes. You will now experience the pain associated with paying taxes at a new level.
- Create a wise financial plan for any refund money that you may receive. You might consider using the money for debt reduction, savings, or investing. Otherwise, that money is going to somehow wander into Wal-Mart and be gone forever!
Questions: What is your tax season financial mindset? Do you think more like the poor or the rich? Do you file your taxes early or as late as possible? Why or why not?