The 2016 tax season is over. Which makes this the perfect time for your readers to start thinking about tax planning for next year.
As of March 17, 2017 (the latest figures available), taxpayers who filed returns for Fiscal Year 2016 received an average tax refund of $2,931, according to the IRS. Most said they’d use their refund to pay down debt (38 percent) or bulk up their savings (41 percent), according to a recent survey from gobanking.com. But that’s last year’s money.
In 2016, taxpayers who filed a return handed an average of $250 a month—interest-free—to the federal government. They could have saved or invested that money instead. Show your readers how to put this year’s tax refund to work for them, and why it’s important to make changes now for next year.
Examine how to adjust the W-4
Extra money in a paycheck can help readers pay off debt, save for emergencies and invest for future education costs and retirement. Increasing the number of personal allowances on the W-4 and adjusting tax withholding are the steps to take. Walk readers through the process of filling out a new W-4 and calculating their tax withholding.
Show how adjustments can pay down debt
The average American household carries $16,001 in credit card debt, according to the most recent (2013) U.S. Survey of Consumer Finances. Households can become debt-free in less than three years by using the 2016 tax refund—and the extra $250 a month retained through adjusted withholding. Have readers use an online calculator, such as this one from the personal finance website The Motley Fool, to create their own repayment schedule.
Demonstrate the power of an IRA
Compounding growth is nothing short of a miracle. Investors who save their 2016 tax refund and an additional $250 a month in an Individual Retirement Account for 25 years in a low-cost mutual fund can grow a comfortable nest egg for retirement. This investment calculator, from bankrate.com calculates the rate of return needed to reach a desired goal, and also takes investment taxes and inflation into consideration.
Reporter’s Resources
• irs.gov, the website of the Internal Revenue Service, offers information on taxes and tax planning.
• aicpa.org, the website of the American Institute of Certified Public Accounts, offers consumers information on a wide range of topics including saving, debt, retirement, and mastering debt at http://www.feedthepig.org.
• moneyunder30.com may appeal to young readers with its irreverent, but highly relevant, information. The site was founded in 2006 by David Weliver, who dug himself out of more than $80,000 in debt in just three years.
• sec.gov, the website of the Securities & Exchange Commission, offers a beginning guide on investing.
