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Tax Refunds: How much and what are you doing with it?

Discussion in 'General Discussions' started by cynthetiq, Apr 13, 2012.

  1. cynthetiq

    cynthetiq Administrator Staff Member Donor

    Location:
    New York City
    I read this periodically. He makes a lot of sense for those just starting out and a good way to reinforce the good behaviors.

    I like this time of the year because people say, "That's giving the government an interest free loan!!! You don't want to do that do you???!?!??!?!?!? Why would you do that??!?!?!?"

    Every year, I get a refund. While it it shouldn't be the only means one has for saving money, it is a prudent simple way for people who cannot save money to get a large lump sum of money at one point in time during the year.

    • How big will your tax refund be?
    We are getting about $9,000 this year.
    • What will you do with it? (Be specific.)
    Most of it goes directly to cash savings. Some of it gets splurged on a big ticket item sub $2,000. Usually though that earmark never gets spent, so it all gets saved. We say we're going to spend it but then we don't. We've planned on buying Herman Miller Aeron Chairs for the past 5 years now. We still use BÖRJE chairs for the past 8 years.
     
  2. Baraka_Guru

    Baraka_Guru Möderätor Staff Member

    Location:
    Toronto
    For us, it isn't so much what we do with a refund; it's more about hoping we don't owe anything.
     
    • Like Like x 2
  3. MSD

    MSD Very Tilted

    Location:
    CT
    I got a few hundred dollars back. I bought myself a few bottles of good beer and put the rest toward credit card payments and the mortgage.
     
    • Like Like x 1
  4. cynthetiq

    cynthetiq Administrator Staff Member Donor

    Location:
    New York City
    Doesn't each company withhold payroll taxes? If you had the maximum withheld would you still owe something?
     
  5. Bear Cub

    Bear Cub Goes down smooth.

    This year, my mortgage interest helped out quite a bit. I was getting around $2800 back with the standard deduction, but after deducting points and interest, ended up getting around $5200 back.

    Most of it will go towards home improvement projects that were already under way (new landscaping out front, bathroom remodel and ceiling repair thanks to LBC Jr. who decided to flood my master bath several weeks back.) About $700 will go towards a new set of tires for my daily driver. Whatever's left (if any) will just get dumped back into savings. If I'm lucky, I'll actually get the time to take an actual vacation this year and put it to use there.
     
    • Like Like x 1
  6. Pixel

    Pixel Getting Tilted

    Location:
    Missoura
    Surprisingly, we are actually getting a bit back this year. About $1400. Usually we owe a little in state and get a couple hundred back in federal. I thought about raising my tax withholdings to do a sort of April Christmas Club savings plan, but as an old boss of mine once told me, "Never give the government more money than you have to."

    We'll probably pay a big chunk of our one credit card, which was at zero this time last year but has inflated back up because of some unforseen medical and vet bills. Then take some and have a little fun.
     
    • Like Like x 1
  7. Baraka_Guru

    Baraka_Guru Möderätor Staff Member

    Location:
    Toronto
    Well, my issue is that I have freelance income that I claim each year. It's fairly minor, but what it tends to do is wipe out any refund. I'm going to claim more writeoffs this year, so it may give me a half decent return this year.
     
  8. cynthetiq

    cynthetiq Administrator Staff Member Donor

    Location:
    New York City
    Pixel, I used to believe the same thing as your boss, way back in the day when I used to also do my own taxes.

    Here is what Mr. Smethi's words are which are exactly the same that I believe for myself.

    So is it better for you to not give money to the government and not be able to get your Christmas club savings every year by saving it yourself?
    --- merged: Apr 13, 2012 at 4:02 PM ---
    If that's a portion of your income plan, you should sit down with an accountant so that you can mitigate that income with correct deductions.
     
    Last edited by a moderator: Apr 20, 2012
  9. Baraka_Guru

    Baraka_Guru Möderätor Staff Member

    Location:
    Toronto
    I'm planning on doing that next week. I know I haven't been maximizing my situation. It's fairly small potatoes, but a dollar saved is a dollar earned.

    I'll report back when I get the outcome.
     
    • Like Like x 1
  10. Speed_Gibson

    Speed_Gibson Hacking the Gibson

    Location:
    Wolf 359
    This year's refund helped pay for my camera upgrade and pay some off bills, along with some other uses. The camera gear was purchased with the intention of making money from it not too far down the road with stock photography sites perhaps or other means still unclear to me. Either way I have no regrets about moving a good two steps past entry level and having an actually decent lens to work with.

    Never truly appreciated or knew for that matter how awesome those 700x 120mb/sec SD cards are until I actually used one. I suspect a cheap SD card is why there were complaints about the T3i being "slow" on Amazon reviews and elsewhere that I looked prior to purchase.What you get when you spend $30 on a 16 GB card somewhere like Walmart or get what retails for $300 for the same capacity.
     
    Last edited: Apr 13, 2012
    • Like Like x 1
  11. snowy

    snowy so kawaii Staff Member

    My husband and I both deliberately withhold at a higher rate to ensure we get a return. Our tax refund went to savings and to buy me new glasses. Some of it will be used to pay for a crown and fillings for me. Yay, dental work.
     
    • Like Like x 1
  12. Plan9

    Plan9 Rock 'n Roll

    Location:
    Earth
    I went up several brackets last year and thus my return was a joke. I never knew why people bitched about taxes until I actually started making decent money. As with most things financial in my life, any large chunks of incoming cash just go back into my money market account (working pool). I rarely splurge on anything; my POS car is paid off, my cellphone is four years old, I eat breakfast cereal five meals a day, etc. Each year, at the beginning of the year, I dump the max into my Roth IRA and a healthy chunk into my short term "house fund" portfolio. Good idea, I guess?

    Threads like this always make me realize how little I think about my money and how little I'm doing to use the giant pile to my best benefit. Scary.

    Gotta find somebody to make me smarter.
     
  13. Bear Cub

    Bear Cub Goes down smooth.

    Au contraire Plan9 , none of us will live to see retirement, so spend! Spend! Spend!
     
  14. Plan9

    Plan9 Rock 'n Roll

    Location:
    Earth
    ...the hell you say, Bear Cub! I will survive!

    I'm bent on suffering and sacrificing my youth so that I can make it to 65 and decide that I should have jumped off a building at 55 after enjoying orgies and Ferraris in my 30s and 40s. The whole point of retirement is toiling and putting away money as you waste the best years of your life.

    It's kinda like getting married and having kids and driving a minivan... all stupid shit that normal people do to occupy time and placate themselves.

    You should be comforted by the knowledge that I bust my ass for money that I don't get to enjoy for no reason other than it seems like a good idea.

    My tax return? I put that shit away. I didn't go out and have a steak. I didn't use it to buy lingerie for my girlfriend so I could soil it with my fluids.

    My frugal lifestyle and sensible planning do not bring me pleasure. I hate my life. But I will survive.

    /channeling my inner Pan, still came out as funny

    Retirement in the US
    If you don't regret the first 40 years, you'll hate the last 40 years.​
     
    Last edited: Apr 13, 2012
  15. Baraka_Guru

    Baraka_Guru Möderätor Staff Member

    Location:
    Toronto
    Let's not talk about retirement; it's too depressing.

    I vow to start saving before I turn 40.
     
  16. Borla

    Borla Moderator Staff Member

    Planning my withholdings to be sure I don't have a tax bill but don't get a huge refund is kind of tricky. About 45-50% of my compensation is in bonuses and commission. Most of my commission is extremely stable because it's contract business, not me trying to sell every day, but it still can vary throughout the year by several grand per month. And since bonuses and commission are withheld at a higher rate, it's a guessing game to nail the overall tax number for the end of the year. My goal is to get about a grand back, but because I'm conservative due to not wanting a tax bill at the end of the year, it usually ends up a bit more than that. This year it was about $2700. Part of it went towards bills, part towards a watch, part towards a years' worth of massages for the wife (watch and massages were our anniversary gifts).
     
  17. fflowley

    fflowley Don't just do something, stand there!

    I guess the original article doesn't apply to me.
    I understand withholding perfectly well, I know how to save and don't need the government to do it for me, and don't generally like being treated like some kind of ignoramus.
    So I want to owe some money come April, while making optimal use of the money earn all year round rather than letting it sit and do nothing in the clutches of the IRS.
     
  18. martian

    martian Server Monkey Staff Member

    Location:
    Mars
    I'm in the same boat as a few others this year -- just happy not to owe anything. Magpie got back quite a chunk of cash, but my return was paltry -- this is chiefly due to a couple of upward jumps in income causing me to make more money than anticipated.

    I really don't mind paying taxes, and I'm also not really worried about the government 'keeping' my interest. If I'm getting a big enough return for the interest to actually matter then I've probably done pretty good anyway.
     
    • Like Like x 2
  19. greywolf

    greywolf Slightly Tilted

    For the first time ever, we will both OWE. And frankly, I'm not upset at that because it's a bit of an accounting thing that put a lot of money in my hands before I had to give it to the government. On the other hand, it will raise flags and conceivably trigger an audit, with is a pain (I've been through on before, and they're a pain, but being an accountant helps, I think).

    As for the argument about paying more and getting a refund or owing, owing is better ONLY IF YOU HAVE INCREDIBLE FINANCIAL RESOLVE. Few people do, so it can be treated as a forced savings plan by overpaying and getting a refund. It takes far less resolve to save/invest/use wisely a $2600 refund than it does to do so with $100 for each of 26 paycheques. The other issue is that if you pay too little, and do not make at least quarterly instalments on your own, you can actually invoke interest penalties if you end up owing too much (and the limit at which that happens is depressingly low... was $250 at one time, not sure what it is now).

    As for getting a refund or not... it's like the story of the 2 women working at the bulk candy counter. One's clients always left with a much bigger smile than the other's. The boss noticed that the one with the happy clients always put in less candy than the customer asked for, and then kept adding more until she reached the weight the customer wanted. The other would just load the scale up, and take away until reaching the right weight. Both sets of customers got the same amount of candy, but the ones who saw candy being added felt like they were getting a bonus, the others felt like they were losing. It was all perception. You will end up paying exactly the same amount of tax, but it's nicer when the government gives some back rather than takes some away.
     
    • Like Like x 1
  20. rogue49

    rogue49 Tech Kung Fu Artist Staff Member

    Location:
    Baltimore/DC
    These days, I'm always paying.
    Supposedly I'm doing "too well"

    I don't get it, I ask them to claim zero, yet they never manage to...I should have them take out a bit more.

    I usually don't have anything to claim against it...just LOTS of medical.
    And even that doesn't count for much since it is against the standard deductible for medical.