So here’s the truth: Tax returns are not what you thought they were. They’re not a kick back you get off the government. They’re not a “Look at all this money the government is freely giving me” myth. They’re not a thing to be excited about. They are actually BAD. Why? Because that means that you gave too much of YOUR hard earned money to the government to hold for you throughout the whole year and they had to give you some of it back. You may want to go back and read that one more time… they are giving you YOUR OWN MONEY back that you overpaid. WHAT!?!?! And guess what?!? They’re making money off of YOUR money.
“Amanda, what’s the big deal? It makes me feel warm & fuzzy to get a fat check in the mail once a year – even if it IS my own money.”
So listen up… once you KNOW BETTER, you DO BETTER.
So let’s learn a better way… one that MAKES you money instead of just holding it and then giving it back to you. Since you own your own business, you have the benefit of getting to hang on to your income tax money throughout the year instead of having it automatically pulled out of your paycheck from an employer.
“Ummmm…. did you just say BENEFIT?”
I sure did! I know that it can be a scary thought to have to reserve your income tax all year long but let me sweeten this deal for you. What if you put that money into an INTEREST BEARING SAVINGS ACCOUNT and watch it GROW all year long? Huh? An interest bearing savings account is a savings account that you can actually make money with. The bank will add interest (a percentage of money) to your account just for you keeping it in the account. SCORE!
So, if you put $10,000 in your “tax savings account” at a 2.0% APY (annual percentage yield), you’ll make an extra $200 off that money by the end of the year! That’s awesome! Then after you pay your income taxes, you can take the money left over and apply it towards your family vacation, college fund, or whatever you want! So, don’t leave that income tax money in a checking account that won’t make you any money – stick it in an interest bearing savings account and make that money, honey! Easy as that!
Quick Tip: Make sure that your interest bearing savings account is LIQUID. No, that doesn’t have anything to do with water or Vodka, or queso… they’re all liquid, get it? Anyways, a LIQUID account means that you have easy access to it (preferably with checks) and can take out any amount at any time needed. Stay away from CDs (Certificates of Deposits) as you will be required not to touch your money for a certain period of time. Money Market Accounts are totally fine and can actually provide a higher interest rate with checks and debit cards. Talk to your banking institution about what’s best for you.