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Message
re: Why are people excited about a tax refund?
Posted on 3/19/14 at 12:04 pm to Cold Cous Cous
Posted on 3/19/14 at 12:04 pm to Cold Cous Cous
quote:
Also, if you are a financial advisor and this is the biggest concern you have with your clients' financial acuity, they're in a pretty good spot.
It certainly is the biggest or only concern I've got, but I see it every year around this time and I wanted to have someone explain the thought process to me. So far, I've had a few good responses that I can respect, including yours.
I guess for me it just boils down to principle - I was raised to respect money and my career centers around money, so despite the inconvenience, I try to have as much of my money work for me as humanly possible.
To clarify, I'm not saying that if you get a refund that you automatically don't give a shite about money. My issue is with the people who intentionally overpay.
0
Posted on 3/19/14 at 12:13 pm to slackster
To me it's like moving money in and out of a checking account to ensure there's never more than a couple hundred dollars at any given time. I would rather just leave enough in the account to safely cover whatever I will need to spend. I realize that this is technically "sub-optimal," but constantly fiddling to squeeze every cent out of the account doesn't seem worth it to me. I would rather spend my time on more fruitful pursuits, like arguing with people on the Internet.
Posted on 3/19/14 at 12:18 pm to Y.A. Tittle
quote:
Ergo, you don't really look as smart as you think you do being the one finger pointing and saying "Haha look how stupid that guy is."
That wasn't my attempt and I apologize if that is how I was understood. The title of the thread is the exact topic I am trying to discuss - why?
I see all types of people this year who are jubiliant that they are getting their OWN money back from the IRS. These are not EIC, but their own actual dollars. In fact, I've heard people insinuate that I'm doing it wrong unless I'm getting a refund. It is truly mind blowing.
Person A has $50,000 of regularly taxed income and has a federal tax liability of $5,929. Throughout the year he has withheld $5,900, so he owes $29.
Person B has the same income and tax liability, but he filed single and 0 all year so his tax withholdings were $6,904, and he will get a refund of $975.
I'd much rather be Person A, even though I'd be willing to bet dollars to donuts that Person B probably thinks he is some kind of wiz-kid because he is getting a refund.
Posted on 3/19/14 at 12:21 pm to Cold Cous Cous
quote:
To me it's like moving money in and out of a checking account to ensure there's never more than a couple hundred dollars at any given time. I would rather just leave enough in the account to safely cover whatever I will need to spend. I realize that this is technically "sub-optimal," but constantly fiddling to squeeze every cent out of the account doesn't seem worth it to me. I would rather spend my time on more fruitful pursuits, like arguing with people on the Internet.
I can live with this answer. If it is a legitimate inconvenience for someone to figure out their withholdings accurately, then I'd advocate erring on the side of caution. That being said, I think most people are just too lazy to give a shite.
Posted on 3/19/14 at 12:24 pm to slackster
quote:
That being said, I think most people are just too lazy to give a shite.
You rang?
Posted on 3/19/14 at 12:39 pm to OnTheBrink
I get a refund every year.... I guess I am lazy and stupid.
To me, its not worth it to make all the adjustments and try to guess how much I'll owe at the end of the year. (Investment Income, Tax Deductions, etc...)
The interest on a couple of thousand would be anywhere from nil to maybe $100. And that is IF that full amount is there the entire year, which it is not, it is slowly accumulating.
To me, an amount equal to a nice meal out is not worth the headache... Especially if at the end of the year I unexpectedly owe $$$ and have to pull from somewhere else to pay.
I'd much rather have a surprise bonus than bill
Don't know if that makes sense or not...
To me, its not worth it to make all the adjustments and try to guess how much I'll owe at the end of the year. (Investment Income, Tax Deductions, etc...)
The interest on a couple of thousand would be anywhere from nil to maybe $100. And that is IF that full amount is there the entire year, which it is not, it is slowly accumulating.
To me, an amount equal to a nice meal out is not worth the headache... Especially if at the end of the year I unexpectedly owe $$$ and have to pull from somewhere else to pay.
I'd much rather have a surprise bonus than bill
Don't know if that makes sense or not...
This post was edited on 3/19/14 at 12:41 pm
Posted on 3/19/14 at 2:10 pm to yellowfin
It's one thing to say refunds are bad if it can be corrected with a simple W-4 change, and there is no risk of underpayment. But more complicated changes often cost more in advisor fees than the income that could be earned from the amount overpaid.
Posted on 3/19/14 at 2:21 pm to slackster
quote:I realize now my post came across as sounding like an accusation and I didn't mean it that way. I apologize.
I've never advocated that for any of my clients or anyone in this thread. What I do/did is an extreme example, and I try to pay my tax liability to the penny as I go.
I know a financial adviser who is hyper-aggressive and he would be the type to recommend a tax management plan like what you do for yourself.
When I was in banking before starting my own business, it was an almost automatic "NO" for any commercial loan applicant who had ever had a payoff plan to the IRS for back taxes.
I can't say banks do that now but I know my bank's thinking was if someone won't pay the Feds on time and they have nukes, how could we expect to get paid on time?
Posted on 3/19/14 at 2:46 pm to LSURussian
quote:
LSURussian
quote:
they have nukes
Intredasting.
Posted on 3/19/14 at 2:55 pm to Poodlebrain
quote:
It's one thing to say refunds are bad if it can be corrected with a simple W-4 change, and there is no risk of underpayment
This is probably the way I should have worded the OP, because it is exactly what I meant. For the VAST majority of Americans, their refund could be corrected with a W-4 change.
I'm well aware that other people have very complicated tax situations, and as such, the inconvenience and possible penalties are not worth the hassle. In fact, in the year where I owed $3600, it was the direct result of my divorce being finalized earlier than I anticipated, and as such, my ex-wife and I could no longer file a joint return.
Posted on 3/19/14 at 2:56 pm to LSURussian
quote:
I realize now my post came across as sounding like an accusation and I didn't mean it that way. I apologize
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.
Posted on 3/20/14 at 7:35 am to Brightside Bengal
By all means please start a thread about ways to do this where its worth the time and effort and legal.
Posted on 3/20/14 at 8:37 am to Ton Chou
(no message)
This post was edited on 10/3/20 at 9:09 pm
Posted on 3/20/14 at 8:41 am to Ton Chou
Congress and the IRS know it is not easy to determine how much tax you owe for a given year, and that calculating the tax is not a simple exercise. That is why they provide safe harbor rules with little, or no, calculations for avoiding penalties for underpayment of estimated taxes.
For the vast majority of taxpayers it is completely unnecessary. For some it is advisable to do so once before the end of the year. There are relatively few taxpayers for whom it makes sense to determine the amount to deposit on a quarterly basis.
For the vast majority of taxpayers it is completely unnecessary. For some it is advisable to do so once before the end of the year. There are relatively few taxpayers for whom it makes sense to determine the amount to deposit on a quarterly basis.
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