Newspaper article THE JOURNAL RECORD

Planning for Big Tax Refund Is Wrong Strategy

Newspaper article THE JOURNAL RECORD

Planning for Big Tax Refund Is Wrong Strategy

Article excerpt

As the end of the year approaches, your enjoyment of the holidays may be marred by your concern about taxes. This means you may be making life and taxes more difficult than need be.

You may be making two big mistakes, according to professionals.

- You turn to your accountant to get a big tax refund when, in fact, you determined the outcome of your tax months before.

- You wait until December to review your records when you should have been doing it all year.

If you believe your accountant did a great job because he obtained a sizable return, you simply don't understand a basic premise of taxes, says Martin M. Shenkman, a New York tax attorney.

``If you are entitled to a large tax refund, it's possible you should rethink your entire tax situation,'' advised Shenkman, a contributor to publications of Matthew Bender & Company, legal and tax publishers. ``Better to pay a few hundred dollars to the Internal Revenue Service in April than to let the government keep and use your money, interest free, all year.

"A large refund probably means that more money is being withheld from your income than should be, not that you have a clever accountant. Consider changing the number of dependents you claim.

``While you may be conditioned for a large refund, you and your accountant should talk about restructuring your affairs so that you pay the least amount of tax that is legal - throughout the year.''

The size of your tax refund does not necessarily mean your accountant is doing a good job, he says.

``It's how small your total tax bite is that counts," he explained. "There is little room for extensive `planning' because many people earn a wage and some interest dividends and have only a few itemized deductions.''

When your year-round record-keeping is slipshod, it is difficult for your accountant to prepare returns, file returns and produce evidence for an audit. Shenkman advises you to devise a system that conforms to your habits.

``Keeping tax records is just like going to a health club,'' he said. ``Every January people resolve to go, but if they pick too rigorous a regimen, they quit by March. …

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