Ho ho ho, ’tis the season. Tax season that is. I am far from a tax genius. In fact, I know almost nothing about the tax code. I don’t think anyone can call themselves a tax expert, considering the tax code itself is pretty darn convoluted. According to NPR, the US tax code is 67,204 pages. Assuming the average person can read one page per minute (which would be pretty tough with all the legal jargon included in the tax code), it would take a little over 46 days of consecutive reading to get from front to back. Do you think anyone has actually read the whole document? And if someone has, do you think they actually retained all they read? I think not my friends.
Every year I’ve earned an income, I have received a tax return between $200 to $1000. That wasn’t the case in 2009. I’m looking at a tax liability of $60 this go around. As a result, I’ve totally slacked off and am yet to file.
People often treat their tax return like a bonus. While many use their return money to pay down debt, add to savings, etc, others treat this as “blow” money and use it for clothing, flat screen TVs, or buying a year supply of tampons (maybe not so much that last one). What people tend to forget is that this tax return is not a bonus, but in fact a loan they made to the government (usually unintentionally) that they are finally getting reimbursed for. When’s the last time you loaned a “friend” a couple thousand dollars for a year at 0% interest? Probably never, so why do you do it for Uncle Sam?
If you know you are getting a return, it’s generally in your best interest to file as soon as you can. That way you get your money sooner, and have loaned it to the government for less time.
My goal for 2009 was to owe, or at least get back, as close to $0 as possible. As I mentioned earlier, this year I’ll be paying $60 to Uncle Sam. I love that I owe the IRS! That means I was able to get my hands on all my hard earned money as soon as I made it. I didn’t give the Fed one cent more than I needed, and I am okay with that.
Since I owe $60, I have not been in a big rush to cut a check to the IRS, but now that the deadline is only two weeks away, I guess it’s time to pay the tax man. I am going to try and follow the same plan for 2010, but getting hitched is gonna throw off my tax game and I’m not really sure what to expect. Usually marriage works to the tax payers advantage though, so I’m not too worried.
I personally think everyone should try and receive as small of a tax return as possible. Who really wants to loan the Fed free money? If nothing else, I guess it at least forces some people to unknowingly save a small part of their annual income, and I’ll never bash someone who saves. Just pinky promise me you wont go blow that return on something you can’t afford, okay? Thanks.
Now on to the questions…
Do you usually file your taxes ASAP, or wait until the last minute?
Do you end up getting a return each year, or do you typically owe?
Have you ever intentionally manipulated your W-4 to try and increase/decrease your tax return?
What is it about the return, that causes so many people to be okay with loaning the gov free money?
Anyone want to loan me interest free money for a year? I’ll be sure to pay you back 🙂
I like to file ASAP. Essentially because I want my money. We don't use it for stuff but debt – i.e. student loans. So the faster I can get it into my hands the faster my debt is paid down. Yay.
To answer most of your questions in brief, I always get a federal refund but have to pay my very high-tax state, which means I file the federal right away and wait for the last minute to file the state.
I usually get a return-I used to be a student (for a loooooong time) and in Canada you get some credits/deductions for tuition etc. Now that I'm contributing to RRSPs (kind of like 401ks if I understand correctly) I get credits/deductions for that too, although I'm going to look into the form here that allows me to keep more of my paycheque throughout the year. When I was a student, I counted on that money like you described above-as a bonus, but now, I want to have more say in where my money goes throughout the year!
I file right away. We always get a refund because my husband gets to claim his meals as a transport employee so that is a huge chunk of our refund. We usually end up with $1500-$1600 back. This year we got $2860 back as we participated in the Home Renovations Tax Credit in Canada so we got reimbursed an additional $1350 for upgrading our home (new furnace, upgraded hydro, insulation, etc.) We always put most on our debt so this year we put $2000 on debt and the rest went to fixing up our van which conveniently started to fall apart as we got money.
I'm a tax analyst, so I do corporate taxes all day long for a living. That said, a 1040 can get complicated in a hurry. I did mine by hand and mailed it in the old-fashioned way, but I take a standard deduction and have no dependents. As I bought a house in 2009, I will probably be itemizing my 2010 taxes to take advantage of mortgage interest.
I usually file early in the tax season. For my 09 taxes I had claimed 2 instead of 1 if I had been following directions exactly, and I got my return down to about $250.
I think the reason people like big refunds is that they are lousy at saving money themselves, and a big refund is a way to have something of a savings goal — they know they'll get a thousand clams in April, and they didn't need any willpower at all to do it! Plenty of people would and do sacrifice the interest rate of a savings account or CD to compensate for their own lack of willpower. Maybe they're on to something — what's the interest rate on a B&M bank savings account? Half a percent? 1 1/2% at an online bank? 3% on a 5 year CD?
We file as soon as we get the w-2s from DH work. I am one of those people who has received a huge return for the last few years, but it is because we sometimes end up on the border of having to pay AMT (DH sometimes receives bonuses as stock, which are calculated differently – we never know when we'll get them). Our 2008 taxes gave us 3k return, but we were literally hundreds of dollars away from OWING more than 5k. We know, because our tax preparer typed in a wrong digit at first. She saw and corrected it right away, but we had even more proof of how close we were! This year all of our money is going to pay for some unexpected surgical bills and putting a new engine in the car. Both of which are things we could have dipped into the emergency fund for, but we are grateful that we don't need to. As for interest – I'm not losing sleep over the 20 bucks we miss out on.
If I owe money, I wait until April 14th/15th to file.
If I'm due money, I file ASAP.
I actually owe $500 this year, so I'm waiting as long as possible to file. =)
I try to get my tax return as soon as possible. Paid down my Cc bill this year and it felt really good. Next year it will probably go towards student loan.
Wow really great point of view. Usually everybody I know trys to get a tax refund, but it really is a 0% loan to the governemnt. If only the same courtesey were extended to us!
You point makes great sense, though a tax refund is an excellent help. I usually get between 400-$1000. Nothing Major. I will however owe the governent this year..
We get our paperwork in to our cpa (mother-in-law!) that way, if we are missing something or she thinks of something, we have some time to get all that plugged in before the deadline. We usually end up sending it in a week or so before.
Since I am self employed, my taxes are paid in quarterly so I see a tax refund as paying part of the next quarter. We actually got a big refund this year (i thought we owed a grand or two, we ended up getting a $1,500 refund). So that pays our next quarters taxes giving us a boost to our savings (since we already saved for next quarter) woo hoo! we bought a few items for my wife's biz that we needed, but I don't see it as some nice bonus from the bonus fairy.
I always file my taxes as soon as I get my W2s, but that's because I always get money back. This year, because of charitable contributions and a new education credit, I got back double what I normally do – $2,700! I'm ok with getting a return because, right now, I'm pretty sure the only money I'm getting back is education credit and donation money. As soon as I get out of school and work full-time, I know I'll need to rethink my tax strategy.
It doesn't piss me off that I'm "loaning' the government money, but like you, I'd rather owe them nothing and get nothing back. Then again, as long as people are doing good with the money, I guess it's nice to get that lump sum to put toward debt repayment!
No, you cannot have any of my money! 🙂
I like to file my taxes straight away. I like knowing that I don’t have to worry about having to do it later or about forgetting (not that that’s all that likely). I prefer to get money back than to discover I owe something, so I prefer to have a refund due to me than to try to get it as close to $0 as possible. (In general my strategy is to put all my refund towards my student loan, but I might take a bit to contribute towards my other goals.)
I must say I had never thought of it as like loaning the government money. Now you’ve brought it up, I’ve thought about it, but I disagree. I see taxes as paying my contribution to society, helping out, and I don’t expect in principle to get it back except in the form of the services that taxes are used to provide. But if the government/law thinks I’ve paid more than my fair share and wants to give me some back, that’s excellent.
That said, maybe my experience of tax would be different if I lived in the US. (You have state AND federal level taxes? Weird!)
I would love to file right away, but since hubby has his own business, much work must be done to get things ready and we often wait a while. Had a professional accountant do our taxes this year for the first time in forever, and found out we had been doing the business taxes wrong for the last 3 years or so, resulting in a sizeable refund for us. Hooray! Because the last several years we've had to pay out the nose in taxes. And while I agree that loaning the gov't money interest free is no good, it's also no good to have to put your tax payment on a credit card, which is what we'd had to do a few times. Suck-o-rama.