Your tax report card
Turning your tax result into actionable financial data.
We often view filing taxes as the finish line. Once you hit “submit,” you are done, right?
Not quite. Your tax return is actually a report card on your financial settings. It tells you exactly how well your automated systems performed over the last year.
Our instincts tell us that a refund is a “win” and a bill is a “loss.” But in the world of efficient financial planning, both extremes are actually signs that our calibration is off.
The Refund Trap
Getting a massive refund feels like a bonus. But let’s reframe it: you just gave the government an interest-free loan for several months. This is money that could be earning interest in a high-yield savings account, compounding in the market, or paying down debt for you.
If you get a refund, do not treat it as “free money”. Economists call this “mental accounting”: we treat a $1,000 tax refund differently than we treat $1,000 of salary. Because it feels like a windfall, we are far more likely to spend it on gadgets or splurges.
The counter to that is to give every dollar a job before it hits your account. Will it fill a gap in your emergency fund? Fund a specific bucket (like retirement)? Pay down a credit card balance? Make the plan now, so the money doesn’t vanish into your daily burn rate.
The Unplanned Bill
On the flip side, a large surprise bill is stressful. It represents a cash flow shock and, in some cases, can come with underpayment penalties.
If that happens, don’t panic. Use your emergency fund to cover it - this is exactly the “unexpected expense” it was built for - and make your #1 priority for the next few months to refill that bucket. If you can’t pay it all at once, contact the tax authority - they often offer installment agreements. If you have to sell investments to pay it, be aware of any capital gain tax implications for next year.
The Calibration Checklist
When filing taxes, the goal isn’t a big check; it’s getting as close to zero as possible. That means you kept your money all year, working for you.
To avoid surprises next year, consider adjusting your settings:
Did you get a big refund? Adjust your withholding (W-4 in the US) to take less out of your paycheck. Enjoy the higher monthly cash flow.
Did you owe money? Check if you had side income or investment gains that weren’t taxed. You may need to pay estimated quarterly taxes.
Did you have a life event? Marriage, kids, or a new house change your tax picture. Update your forms with your employer.
Whether you owe money or get money back, the outcome of your tax return is a signal that requires action, not just reaction.
Let’s Talk Money!
If you receive money back, what is one specific “job” you could give your refund?
If you owe money, what’s your plan to pay it off without derailing your other financial goals?
What is one change you can make today to get closer to a “$0” outcome next year?