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Started By
Message
Why are people excited about a tax refund?
Posted on 3/19/14 at 10:06 am
Posted on 3/19/14 at 10:06 am
I'm not sure where the MT stands on tax refunds, but I hate them. In fact, I get somewhat sick if I see that I am getting a refund, because that means my money spent a year or more with the IRS earning exactly NO money for me.
Barring any drastic year-end changes, I believe you can accurately judge someone's financial acumen based on the size of their refund.
I know some otherwise intelligent people that knowingly get back thousands of dollars every year, and I am simply baffled. Outside of an unforeseen tax break, there is no excuse for an individual, much less a salaried employee, to get a refund of more than $500.
I take painstaking care to withhold as little as possible, while still avoiding any underpayment penalties. In fact, I owed approximately $3,600 in 2012 and opted for the installment plan over 36 months because the penalties (.5% monthly) and interest (3% annually) are still considerably less than I've averaged on my other investments. My $3,600 debt cost $4,104 over the next 3 years, but that is only 4.46% annualized. I'd rather own Phillip Morris for 3 years and take my chances. That rouge may not be for everyone, but it is much better than the alternative.
/rant
Barring any drastic year-end changes, I believe you can accurately judge someone's financial acumen based on the size of their refund.
I know some otherwise intelligent people that knowingly get back thousands of dollars every year, and I am simply baffled. Outside of an unforeseen tax break, there is no excuse for an individual, much less a salaried employee, to get a refund of more than $500.
I take painstaking care to withhold as little as possible, while still avoiding any underpayment penalties. In fact, I owed approximately $3,600 in 2012 and opted for the installment plan over 36 months because the penalties (.5% monthly) and interest (3% annually) are still considerably less than I've averaged on my other investments. My $3,600 debt cost $4,104 over the next 3 years, but that is only 4.46% annualized. I'd rather own Phillip Morris for 3 years and take my chances. That rouge may not be for everyone, but it is much better than the alternative.
/rant
12
Posted on 3/19/14 at 10:15 am to slackster
I work in credit and see people tax returns all the time.
Many of the people making 100k+ in salary have tax shelters or other businesses that lowers their taxable income. Therefore, taxes that are withheld from their paycheck (beyond their control) are returned to them by the refund. Those refunds are good and are nothing to scoff at.
Many of the people making 100k+ in salary have tax shelters or other businesses that lowers their taxable income. Therefore, taxes that are withheld from their paycheck (beyond their control) are returned to them by the refund. Those refunds are good and are nothing to scoff at.
Posted on 3/19/14 at 10:17 am to slackster
Your thoughts are right on line with the MT best I can tell from past threads like these.
I got $5,300 back, can you judge me Focker?
Now, I know all the arguments against it, and that's great, but for us, our money went for an extra house payment this year (another thing the MT frowns upon), our vacation, clothes for the kids for the summer, and whatever left was put into our Sharebuilder account. We put well over 15% of our income toward retirement savings, so I feel like we are good there.
So, for us, it just works. Instead of budgeting for these things, mainly vacation, throughout the year, we use our refund.
quote:
I believe you can accurately judge someone's financial acumen based on the size of their refund.
I got $5,300 back, can you judge me Focker?
Now, I know all the arguments against it, and that's great, but for us, our money went for an extra house payment this year (another thing the MT frowns upon), our vacation, clothes for the kids for the summer, and whatever left was put into our Sharebuilder account. We put well over 15% of our income toward retirement savings, so I feel like we are good there.
So, for us, it just works. Instead of budgeting for these things, mainly vacation, throughout the year, we use our refund.
Posted on 3/19/14 at 10:20 am to slackster
After my first year of working, I upped my allowances and still got a sizable refund, so I've upped by another one again for this year.
Eventually I'll get it close.
I was only "excited" for my refund in the sense that they processed it quickly, but ya, I'm trying to get it down. This was my first year doing my taxes so I'm figuring it out.
I would have let my mom keep doing it but I don't want her to see how much I make
Eventually I'll get it close.
I was only "excited" for my refund in the sense that they processed it quickly, but ya, I'm trying to get it down. This was my first year doing my taxes so I'm figuring it out.
I would have let my mom keep doing it but I don't want her to see how much I make
This post was edited on 3/19/14 at 10:21 am
Posted on 3/19/14 at 10:21 am to slackster
I like your theory but interest/return on a 3k refund really isn't worth my time
Posted on 3/19/14 at 10:33 am to slackster
I usually underpay and just eat the penalties. It's hard to know what were going to owe from year to year since my wife is a business owner, and it depends on what equipment she purchased, if she did any work at the store, etc. We generally will oversave, but I keep it in a savings acct and Uncle Sam gets is on 4/15. If we over save, it's like getting a refund, but without waiting for the check to come in the mail.
Posted on 3/19/14 at 10:39 am to slackster
We try to zero it out as close as possible, but we usually owe a little each year.
Posted on 3/19/14 at 10:39 am to slackster
I have a refund of $9,200 which I just apply to my 2014 tax liability to save me from having to send in a quarterly estimated payment on 4/15/14.
quote:I guess I'm financially stupid....
I believe you can accurately judge someone's financial acumen based on the size of their refund.
Posted on 3/19/14 at 10:40 am to slackster
2 things:
1. The EIC people are, effectively, getting a paycheck (not a refund, but a direct transfer). They are legitimately making out.
2. People are conditioned to being happy about the refund, because that's good for the IRS. They appear to be giving you money at one time, because it is almost invisible when they take that money every paycheck.
The power of propoganda is stunning, particularly if there is private market advertising to reinforce it - look at all the marketing around people lining up to take that dirty, worthless refund check off your hands in exchange for a shiny new car, or television or whatnot.
How can you not be happy about free money (and category 1. above really are getting "free" money - free to them)?
1. The EIC people are, effectively, getting a paycheck (not a refund, but a direct transfer). They are legitimately making out.
2. People are conditioned to being happy about the refund, because that's good for the IRS. They appear to be giving you money at one time, because it is almost invisible when they take that money every paycheck.
The power of propoganda is stunning, particularly if there is private market advertising to reinforce it - look at all the marketing around people lining up to take that dirty, worthless refund check off your hands in exchange for a shiny new car, or television or whatnot.
How can you not be happy about free money (and category 1. above really are getting "free" money - free to them)?
Posted on 3/19/14 at 10:43 am to slackster
quote:
because that means my money spent a year or more with the IRS earning exactly NO money for me.
This statement is false. Part of your money spent more than a year and part of it only was there for a few months. On average your money spent a good bit less than a year there.
Posted on 3/19/14 at 10:56 am to slackster
I make sure I owe them every year. Any penalty is far less than a minimal return I make on the money.
Posted on 3/19/14 at 11:48 am to slackster
I mean you get the refund and apply it towards roth, debt, etc... That's what makes me happy about it.
Posted on 3/19/14 at 11:10 pm to slackster
quote:
I'm not sure where the MT stands on tax refunds, but I hate them. In fact, I get somewhat sick if I see that I am getting a refund, because that means my money spent a year or more with the IRS earning exactly NO money for me.
I try to owe the IRS a little for the reasons you give, although I don't get worked up if I miscalculate b/c the interest isn't worth much.
The main thing for me is the state tax - my state (Virginia) almost always owes me twice what I owe the IRS but unfortunately I can't even that out without triggering underpayment IRS penalties.
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