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Is trying to hit $0 refund or payment in April worth it?
Posted on 6/19/14 at 11:16 am
Posted on 6/19/14 at 11:16 am
So I recently asked to see my my w4 to help my wife fill hers out. I told the hr lady that I didn't mind getting money back in April (normally about $1000), just didn't want to have to pay. Yes, theoretically I'd rather hit $0 on the nose but how big of a deal is it really... Theoretically theoretically the best method would be to pay no paycheck taxes, invest everything, and pay all taxes in April.
So when I tell her this she condescendingly tells me "I guess you don't mind giving the government an interest free loan."
First of all, frick you....
Second of all, I ran the numbers and with a return of 7% compounded daily also using the $1000 starting at $0 on 1/1, I'd net a whopping total of $33 worth of interest!
/rant
So when I tell her this she condescendingly tells me "I guess you don't mind giving the government an interest free loan."
First of all, frick you....
Second of all, I ran the numbers and with a return of 7% compounded daily also using the $1000 starting at $0 on 1/1, I'd net a whopping total of $33 worth of interest!
/rant
5
Posted on 6/19/14 at 11:32 am to poochie
yea, that (giving the gov an interest free loan) is an old argument that really does not amount to anything once you put the pencil to the paper. It is usually spouted off by people that get a little jealous when all their friends start getting big refunds and they realize that they did not save the money from every paycheck like the were suppose to. Really not a right way and a wrong way, whatever you feel is better for your situation
This post was edited on 6/19/14 at 12:07 pm
Posted on 6/19/14 at 11:37 am to poochie
I just try to get reasonably close. It's true that a refund amounts to an interest-free loan but but the amount saved isn't much unless you are Donald Trump.
For me personally, there's also the fact that Virginia income taxes are pretty low so that is what I actually try to target. I usually get a refund from VA but owe the IRS money.
For me personally, there's also the fact that Virginia income taxes are pretty low so that is what I actually try to target. I usually get a refund from VA but owe the IRS money.
Posted on 6/19/14 at 11:57 am to poochie
I mean I guess 0$ would be ideal but I usually get a little under $1000 back and it's absolutely not worth my time to spend an hour or two tweaking it just to save like 30 bucks in theoretical investment return...
Posted on 6/19/14 at 12:21 pm to poochie
I worked in public accounting for 8 years and prepared thousands of individual tax returns and never had a typical 1040 hit $0. The only ones I ever had hit $0 were senior citizens that didn't owe any tax to begin with, and didn't pay any tax during the year, or business owners with large pass through losses or NOL carryforwards.
And yeah, the interest you'd earn on investing throughout the year is peanuts. I never advised a client to aim for $0. I asked them if they were good at saving and if so, that was a good move, and if they weren't good at saving, I pointed out how nice getting a $1-$2k check was just after the Christmas shopping season.
And yeah, the interest you'd earn on investing throughout the year is peanuts. I never advised a client to aim for $0. I asked them if they were good at saving and if so, that was a good move, and if they weren't good at saving, I pointed out how nice getting a $1-$2k check was just after the Christmas shopping season.
Posted on 6/19/14 at 12:31 pm to poochie
you should have asked her if she underpays during the year to make sure she gets the maximum "free loan" allowed from the government
if she's not, sounds like she's leaving money on the table
if she's not, sounds like she's leaving money on the table
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