I’ll be getting a federal refund from the IRS for about $1800, for 2006. I don’t know much about income taxes but I believe that I’ve usually got refunds (instead of having to pay the IRS) because, when starting new jobs, I’ve always chosen the option of “deduct money from my pay checks now”. (I need to put what exactly that option is called here.) I wouldn’t be surprised if most people choose the other option, where their pay checks are fatter, then they are surprised come April when they owe, because they don’t realize that money isn’t being witheld. Of course, unfortunately, not everyone has the luxury of doing it my way, but for those who can, I highly recommend it. Wouldn’t you like to look forward to tax season every year?
Being the responsible person I am, I’m not going to blow it (I don’t think I ever have). Instead, $1550 is going to Fidelity, toward my IRA, which will max out my 2006 contribution of $4000/year.
My refund was initially $1600 but after deciding to contribute $1550 toward my IRA, the refund increased to $1800. I think this is a way of the IRS to encourages people to contribute to IRAs.
This is a good time to remind my readers to consider an IRA. The earlier you start the better. Time can be a more important factor than how much money you contribute, if you start too late. It’s all about compounding interest.
