Tax returns

I witnessed this discussion. 

Party one: I'm only going to get $50 on my tax return.

Party two: I'm only getting $30.

one: an accountant told me I could increase my withholding and get a couple thousand dollars next year. 
 

Me: you two did it perfectly! You didn't give the government an interest free loan for the year! Plus, when you get your money back, it is worth less than when you earned it because of inflation. 
 

One and two each pause to impersonate a deer in the headlights. A faint burning odor can be detected. After explaining it a few more times, it seemed to take (it's not complicated).
 

Now, both of these people are pretty smart, ten to 15 years out of high school. Apparently, they never thought it out or encountered someone who had. 

Agree there are a few misconceptions that many people have about paying taxes.  Needless to say, it is not in the best interest of guvmint to change these misconceptions.

Yep, if you are using the US Gov't as a zero interest saving account you are doing it wrong.  Some people just don't understand that.

I'm going to beat Duke to the punch with the "Returns are the paperwork, refunds are the money" gripe that arises every year.

I hit it about perfectly this year... $26 refund from the Feds.  Close as I've ever gotten to $0.  Honestly, I'd rather owe a small amount than give them the money interest free all year.

I think things would change a LOT (and for the better) if we all had to write a check for our taxes every month instead of having them magically disappear from a paycheck.

NickD said:

I'm going to beat Duke to the punch with the "Returns are the paperwork, refunds are the money" gripe that arises every year.

You beat me to it.

Rodan said:

I think things would change a LOT (and for the better) if we all had to write a check for our taxes every month instead of having them magically disappear from a paycheck.

I've been saying that for a long time.

Everyone should be self-employed or run their own business for a while. It would be great to see what happens when more people get tired of some entity standing there with it's hand out every time you make a dollar.

ShawnG said:

Rodan said:

I think things would change a LOT (and for the better) if we all had to write a check for our taxes every month instead of having them magically disappear from a paycheck.

I've been saying that for a long time.

Everyone should be self-employed or run their own business for a while. It would be great to see what happens when more people get tired of some entity standing there with it's hand out every time you make a dollar.

Don't you talk about my wife and kids like that!

NickD said:

I'm going to beat Duke to the punch with the "Returns are the paperwork, refunds are the money" gripe that arises every year.

Thank you, sir, for that PSA.

Yeah, I aim to owe the taxfolk a small amount every year, <$1000.  That way I know I've calculated perfectly.

Now, for another rant, I always had to have the IRS withhold at the single rate with zero deductions just to have something close to the right amount withheld for a married person with 2 children and a mortgage.

Since they're in charge of both sides of that calculation, why can't they get it right?!

In reply to Duke :

Because income tax was only supposed to be temporary and was never properly, legally, ratified as permanent so they still haven't figured out how to do it?

In reply to Javelin :

Maybe I should list the government as a dependent then... 

I owed the State of Ohio $2.00 this year and I had to send them a check.  You would think that below a certain amount they would not want to process a check.  

Another PSA:

If you're of a certain age, my local library has certified accountants that do your taxes for free.  They're supported by AARP.  Show up in the morning with paperwork, return in the afternoon to sign the finished product.  They submit it electronically; we got a refund from both A & B in <5 days.   

Check your local listings ....

In reply to Floating Doc (Forum Supporter) :

You're not wrong. I don't like using the IRS or the state as a zero-interest piggy bank. In theory, I'd prefer to owe/get as close to zero as possible. In practice, though, it is sometimes easier to sacrifice a few bucks in lost interest than it is to request a change to the family budget.

Actually, now that I say it, she is more flexible than she used to be in such matters. It might be worth doing the math and talking it over this year.

I once had someone tell me that they intentionally maxed out their withholding because they would be certain to spend the money as soon as they got their hands on it.

It was the only way they could accumulate some cash.

Floating Doc (Forum Supporter) said:

I once had someone tell me that they intentionally maxed out their withholding because they would be certain to spend the money as soon as they got their hands on it.

Mrs Monohue grew up poor. Their approach to budgeting was to spend whatever money they had on whatever they wanted as quickly as possible, before it ran out.

That behavior has, thankfully, been unlearned, but it is an easy mindset to fall into when there is little hope of saving for the future. 

DarkMonohue said:

Mrs Monohue grew up poor. Their approach to budgeting was to spend whatever money they had on whatever they wanted as quickly as possible, before it ran out.

That behavior has, thankfully, been unlearned, but it is an easy mindset to fall into when there is little hope of saving for the future. 

Very, very true.  It's hard to plan long term when you don't have enough money in hand to eat all of this week.  Been there.  

Now as a small business owner, though, I'm firmly on the side of paying a couple of grand each quarter, and still owing a bit at the end.   It does genuinely feel good to know that the government is waiting on me to pay, not the other way around :)

I always get a sizeable return. I do it on purpose and I do math everyday, mostly financial math. To me it's a mindset / insurance thing and not a % thing. For me the piece of mind knowing I am not getting a bill and I'm going to end up with a check that I get at one time is a benefit. We are talking about a couple percent so $20/ thousand that you get back. Meh, if Uncle Sam gets that out of the interest fine. Sure I could have calculated it perfect and saved that money myself but to me the real life difference in $ is minimal so everyone should do what works for them. 

In reply to NY Nick :

I claim zero dependents so I get a refund every year.  Not huge, like this year was around $1500 I think.  To me I'm not going to notice the extra $20-50 or whatever each week.  But it's nice looking forward to a bit of cash in February.  Which a friend said explains why my car purchase anniversaries all seem to be Feb or early March.

In high school they teach math up to calculus yet basic finance stuff gets ignored.  My eye opening moment was in college when I took a basic finance course and learned how much the bank made from a mortgage and how tax rates varied based on income.  We should all know how to fill out a long form return and our home state return as a requirement to graduating high school.  

In reply to porschenut :

I know some well educated people who are clueless on how tax rates work.  "If you keep your income below X then you will actually take home more money because you stay in a lower tax bracket".  Well hell, why don't I make under $9k a year and be filthy rich because that bracket doesn't pay taxes at all?

Put me in the "minimal refund to slight payment" camp.  I've had otherwise intelligent people brag about their high refunds and I'm like, you know that money was always yours and you just let someone who isn't you play with it for a while, right?

We get a tax refund every year. We use it to pay our outlandish school/property taxes. I know it doesn't 'make money' doing it that way, but it reduces stress, which has value.

We owe every year.  This year I'm going to put the money in a high interest savings account every month so it grows for me, then when the tax bill comes I'll pay out of that account and hopefully have a headstart for next year. I'd rather have my money work for me then someone else.  

I had a heavy commission setup that paid me a $30,000/year salary. I'd adjust my check to take out a reasonable amount at $1154/bi-week.  Then I'd get a commission check anywhere from $5,000 to $20,000/month.

Try to sort that out to not get too much taken out.....

I pay the same amount in estimated taxes every year.  I usually get a refund, but the amount depends on what depreciable purchases I made and how the business did that year.