Via (Janet Berry-Johnson): It's almost April. Have you filed your tax return yet? Did you get your refund? Chances are, if you're getting a refund you've already got an idea of how you want to spend (or save) it. But if you're still looking for ideas, who better than CPAs to look to for examples of the best way to spend your money?
Of course, most CPAs will first advise you to plan your tax strategies so you don’t receive a large refund. After all, a large refund simply means you've given the federal government an interest-free loan. The goal should be to pay just enough taxes, taking home a larger paycheck each month and getting little to no refund at tax time.
But just in case you didn't plan ahead or a change in your tax situation resulted in a refund from Uncle Sam, I reached out to a handful of CPAs at Piercy Bowler Taylor & Kern in my hometown of Las Vegas, Nevada to get a few (mostly) practical tips.
Firm founder Richard Bowler says he hasn't received a tax refund in years, by design. “You shouldn’t have much of a refund because you’ve balanced out your tax liability throughout the year,” he says. Another common strategy, especially for self-employed people and business owners like Bowler, is to apply the refund to the following tax year.
But when they do receive a tax refund, here is how some of the PBTK accountants choose to spend it:
“As an uber conservative accountant, I typically reinvest any tax refund I obtain into a money market fund. Now, if I really want to get crazy, I will typically earmark 10% to keep as “mad money” which can be used for anything from a gift for the wife to muscle car parts.” – Ryan Whitman, CPA, Shareholder
“Though good tax planning means no large refunds, if I do have a refund I apply the refund to next year’s tax liability.” – Scott Taylor, CPA, Shareholder
“I would apply my refund to next year’s projected tax liability.” – Jeff Edwards, CPA, Shareholder
“Put it all on black!” – Troy Crowther, CPA, Principal
“All of my refund will be used to fund an index fund. I’d rather let the money grow then spend it.” – Michael Cen, Senior Associate
“This year we bought a piano and the rest went to saving for a house down payment,” said Reas Allen, CPA, Audit Manager
“I am buying new tires for my car with my refund this year,” said Angela Go, CPA, Audit Manager
For the accountants at PBTK, the common themes for how to spend a tax refund are 1) plan to not receive a refund, 2) use the refund to pay next year’s taxes or invest it in an account that will grow, and 3) buy a large ticket item that requires a lump sum. Whatever you do, do not follow Troy Crowther's lead and spend it all on a casino floor. Take it from a Las Vegas native: the house always wins.