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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 10:24 am to yellowfin
quote:
I like your theory but interest/return on a 3k refund really isn't worth my time
This is how I feel. It's like when you put on jeans and find cash in your pocket. You forget about it, and it's nice to find it later.
This post was edited on 3/19/14 at 10:25 am
Posted on 3/19/14 at 10:30 am to PetreauxCat
quote:
You forget about it, and it's nice to find it later.
This is the real benefit to waiting on the refund.
If you don't have a very structured plan for the extra money during the year, or you aren't solid with budgeting and would probably spend the money on frivolous items, then the refund is a good way to work things.
For the record, I try to minimize my return down to zero.
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 10:37 am to LSUGUMBO
I got slapped with a hefty penalty a few years ago, like $1000 for underpayment. I did have a great year on the stock market.
Since then i have upped my contribution, and usually get back 1000-2000
Since then i have upped my contribution, and usually get back 1000-2000
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 10:45 am to OnTheBrink
quote:
So, for us, it just works. Instead of budgeting for these things, mainly vacation, throughout the year, we use our refund.
I see this all the time, and I understand that it helps for those that have trouble budgeting and/or saving throughout the year. It just frustrates me that people are so indifferent about not earning a red cent on their own money. Hell, send me $5,300 and I'll give it back to you next March.
Posted on 3/19/14 at 10:49 am to LSURussian
quote:
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.
Yep.
quote:
I guess I'm financially stupid....
Me too.
We are getting back just under $12k this year. Because I have to pay taxes on distributions and on any profit the company makes whether I choose to pay myself that money or not I withhold enough to make sure that I don't have a huge tax liability in April. I do NOT want to have to pay quarterly estimated taxes. I'd much prefer to get that $12k and use it to help fund the new roof that I'm putting on my house this spring.
Posted on 3/19/14 at 10:50 am to slackster
The entire $5,300 wasn't there for a year and if it were a savings account would have netted you about $50 at today's rates.
Posted on 3/19/14 at 10:50 am to slackster
quote:Why does it concern you what other people do with their money?
It just frustrates me that people are so indifferent about not earning a red cent on their own money.
Posted on 3/19/14 at 10:52 am to LSURussian
quote:
Why does it concern you what other people do with their money?
Exactly.
Posted on 3/19/14 at 10:54 am to Teddy Ruxpin
quote:
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.
My employer has a paycheck calculator tool on the HR website that allows you to play with your allowances to determine what your check and withholding would be each pay period. There are other useful calculators online, even on the IRS website I believe, that can keep you up to date with your withholdings for the year.
I'm paid a small salary, but most of my income is commission, and as a result, I get 14 set paychecks throughout the year, and 12 commission checks. Our payroll computer apparently has an issue with the disparity and taxes the shite out of my commission checks as if I make that amount of money each period. I manually control my withholdings and update them each quarter. As it stands, I usually claim single with 99 allowances, and then withhold an additional $700 per pay period. It damn near eliminates my salary-only paychecks, but it puts me almost exactly where I need to be at year-end.
Posted on 3/19/14 at 10:54 am to slackster
quote:
It just frustrates me that people are so indifferent about not earning a red cent on their own money.
Sorry to upset you. Like I said, for us, it just works. I have plenty of other investments and I feel like my wife and I are doing just fine, as financially stupid as we might be.
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