Financial experts offer advice on tax refunds

By Jazmine Knight

April 15 marks the deadline for all tax filings, which means if you haven’t already received one, tax refunds are soon on the way for those who qualify.

Some people put their refunds in savings, some use it to pay bills and others even use it for a vacation. And according to Nick Gertsema, CEO of Gertsema Wealth Advisors, his clients typically spend their refund more than once.

“Clients tend to get excited when they know they’re going to get one,” Gertsema said. “They’ll spend it when they know that it’s coming and then they’ll sit down and be responsible and they’ll come up with a plan and have an idea of what they’re going to do. Then they’ll spend the third time what it actually comes in.”

Gertsema tells his clients that typically when your taxes are filled out correctly, refunds are usually not going to be a life-changing amount of money. He encourages the public to either reward yourself reasonably, retire some debt or pay your future self.

“So if you save some of the money and then put it somewhere where if something were to happen, you then don’t have to run to a credit card, that’s going to be really advantageous,” Gertsema said.

He said he oftentimes has clients that will ask about investing in stock or Bitcoin with their refund. However, it may not be the best option for everyone.

“Typically, taking care of debt is going to have a much bigger impact on your situation or saving than trying to get it into the markets,” he said.

One common misconception is that if your refund is bigger, then you paid less in taxes that year and vice versa. But that’s not always true.

“In reality, the refund that they get is the difference between how much they’ve already contributed and what their tax liability is for the year,” Gertsema said.

Ultimately, he said, the goal is to be at zero, which means not owing anything and not getting a refund.

“Because we don’t want to give the government a 0% loan,” he said.

More times than not, those who owe money tap into their savings, cut their budget or open another credit card to take care of expenses. If this happens to be you every year, you may want to look into how much you are withholding.

“There are different things that you can do to make sure that you withhold more all the way up to paying estimated tax payments,” he said.

Gertsema wants everyone to get ahead of taxes whenever possible, and said that it’s easiest to handle taxes on your terms compared to the government’s.

“We don’t like surprises when it comes to taxes or anything. We want to empower our clients to make their life’s decisions on their terms. And when the tax man says you owe them a bunch of money, that’s no longer their terms,” he said.

He said it all comes down to tax planning.