Is it good to get a tax refund from the IRS every year?

What stewardship implications does this have?

Mark 12:17 (ESV) – Jesus said to them, “Render to Caesar the things that are Caesar’s, and to God the things that are God’s.” And they marveled at him.”

When we do our seminars across the country, one thing we like to say in conjunction with this passage is, “render unto Caesar what is Caesar’s, but not a penny more.” This article deals with just that, paying our taxes to Uncle Sam (here in the US), but we want to make sure that we are not paying more than what we need to!

A good steward will be proactive in not just their income and expenses, but also in making sure that they pay what is needed and necessary for their taxes. This is not because we are stingy and cheap, and it is not that we do not love our country!  It is all about building God’s Kingdom, not some sort of earthly territorial kingdom. If we can legally, ethically, and morally reduce our tax footprint, and re-direct that money to Kingdom purposes…the game is on! So, is it good to get a tax refund? How can we not “tip” the IRS?

 

What causes you to be audited?

Disproportionate numbers (income compared to deductions).

According to a study by USNews and World Report here are some reasons why people may be audited:

  • You did not report all your income
  • You took the home office deduction
  • You reported business losses
  • You had unusually large business expenses
  • You did not report all of your stock trades
  • You did not report crypto currency payments
  • You made large charitable contributions
  • You earned a lot of money
  • You made an error(s) in your reporting

The IRS has to audit using a cost-benefit perspective. They’re not coming after the “little guys.” It doesn’t make sense to use thousands of dollars in resources to get back a couple hundred dollars of taxes.  Who are “the big guys?” Adjusted Gross Income of over $400k are at a much higher risk of being audited.

I wouldn’t be too worried about being audited, as long as you are continuing to honor the Lord and do what is right with your taxes.

 

What do you mean by “tipping” the IRS? Getting a refund consistently every year!

Not taking advantage of legal tax loopholes to morally and ethically reduce your tax burden

  • Not doing Roth Conversions to reduce your lifetime tax bill
  • Not doing a QCD when you are 73 instead of an RMD and giving charitably out of cash.

Avoiding Penalties – The “Safe Harbor” Rule

Getting a tax refund is another way to “Give the government a no-interest loan!”

 

Is it Good to get a Tax Refund? Common Phrases We Hear

  • “It’s a forced savings”
  • “It pays off my Christmas bill”
  • “Its a vacation fund”
  • “It’s my home repair fund”

The reality is, you can’t guarantee that that money will actually be there. What it comes down to: “I have poor financial discipline, and if i have that money, Im gonna spend it”

 

How do you Protect Yourself from Yourself or the IRS?

  • Don’t owe too much and pay additional penalties (If you owe over $1,000, you may have to pay additional IRS penalties)
  • If you are not going to use “Uncle Sam” as their forced savings account for a year…What are the top things that one should do if they make the change?
  • Re-tool your budget so that money is built into it and accounted for!  This should be a high priority…getting those “orphaned” dollars named into your budget”
  • Calculate how much money per paycheck went to the IRS in the past year, and weekly put that into an online savings account for those things (vacations, Christmas, etc) that you used that money for in previous years.
  • If that money was not critically needed for a future expense, then use it for:
    • Paying down debt
    • Paying down your mortgage
    • Building a car replacement fund
    • Fully funding your Roth IRA’s
    • Funding a child/grandchild’s education fund
    • SAVE!

 

Stewardship Application

Do not be lackadaisical about your taxes. It could impact:

  • An audit coming upon you (unlikely, but possible).
  • Your monthly income and distribution of that income.
  • And it could increase your monthly generosity to your church.
  • It also, for those that are taking as many tax breaks and advantages allowed, it may allow you to be much more generous to your local church and other ministries due to using the benefits of charitable giving as laid out in the US tax code.

So is it good to get a tax refund every year? Here’s our advice: Render unto Caesar what is Caesar’s…and not a penny more!

A good steward will investigate, tweak and/or change what they need to in order to pay their fair share, on time, every time, and not a penny more!

 

Next Steps

 

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