Income Tax--Discussion with my boys

[Giles]

I had a discussion about income tax, with my three sons. Their thought are different from mine in that they like to receive a tax refund.., as do many people--the majority I guess.
Although I am long retired, I felt I was better off to pay as little taxes as possible and end up paying what I owed when filing tax returns.
My thoughts were---why should I pay too much and let the government use my money INTEREST FREE !!
Ever wonder why most people receive their returns on a Saturday---gov. can get a couple of extra days interest free use
Of course it's nice to have the refund to spend on what you want, but why not just put a little money into a special account like a Christmas Fund and draw a little interest ?
I always had just the right amount withdrawn to avoid a penalty.
Each year, I would have enough money in my Xmas fund to more then cover what extra I had to pay.
It's not just young people--at work many of my fellow employees would "Brag" about how much of their money they were getting back??

 

[jharkin]

Most Americans have neither the interest to learn or the willpower to save, so the treat it like free money. Ever wonder why the national savings rate is still close to zero....

 

[peakbagger]

The big refund approach is popular with folks who live paycheck to paycheck and have poor or no financial skills. I personally take it as a challenge to end up owning the maximum amount before I have to pay a penalty.

 

[snowleopard]

I prefer to write a small check or hit the break-even point, myself. It's just easier on the budget that way. I've got a few years left before Teenthing1 is out of college and Teenthing2 is out of HS/college/whatever. Until then, I hate budgetary surprises. I often start working on my taxes in November or so, and usually file around mid-April. Not trying to be obstructionist, just take it in small chunks, and modify it as I go so that it's tight as a drum when I finish.

I used to go into the winter worried about two things: how much oil is going to cost, and how much my taxes would be. With the woodstove in, the first is not so much of an issue.

ETA: thanks for the thread and reminder. I always feel better going into the new year if I've started working on taxes--this year I hadn't done that. It was sit inside and work on that, or go outside and haul firewood. I chose the former, and got far enough underway to have a worst-case scenario, and it's one I can live with. Now, dang it, gotta go haul some birch.

 

[SlyFerret]

I try to break even, but prefer to err to the side of having a refund. I don't want to get caught owing money, since messes up my budgeting plans. Any interest I would have made on my less than $1000 refund (what I usually see) isn't worth the trouble of a surprise like 3 Years ago when I ended up owing $1200 when my employer messed up my withholding rate.

Now that my credit card debt is paid off, any refund will go into savings, and eventually be used for a zero turn mower and a utility ATV this spring.

It sure is nice not living check to check anymore.

-SF

 

[btj1031]

Giles - I agree with you 100%. However, when I file my return for the prior year I adjust my withholding for the current year so that on paper I have a $500 refund. That way, if things change during the year for either my employment or my wife's (like a raise) and we don't take a close look at our withholding at that time, there's a cushion.

2 years ago was an odd year for me employment-wise, and changing jobs provided for some separation pay from the first, and the withholding on that check was automatically in the max bracket. I didn't adjust my regular withholding and ended up with a $7K return when all was said and done, which was a bit of a surprise. I knew I'd get a decent return but didn't think it would be that big. A check that big out of nowhere was kind of fun.

 

[BrotherBart]

Totally agree with ya. I have had to write the check every year for the last 40. I keep my dough and send them just what I have to.

Even though these days interest isn't worth putting out much effort to get it.

 

[SlyFerret]

I should have mentioned, I have no idea what to expect this year. With the new baby (our first), and a couple of bonuses at work (never had those) that were withheld at a higher than normal rate, I imagine I'll have pretty good sized refund coming this time around.

-SF

 

[Agent]

After my first full year as a taxable working person, all I know is I'm going to be peeved since my two options are : a) They took so much that I'm "allowed" to get some back, or b) They took a bunch, but still want more.
I wonder if they'd accept firewood as partial payment?

 

[snowleopard]

After my first full year as a taxable working person, all I know is I'm going to be peeved since my two options are : a) They took so much that I'm "allowed" to get some back, or b) They took a bunch, but still want more.
I wonder if they'd accept firewood as partial payment?

Heck no! They ask how many cords you cut, convert the btu's to oil, deduct the wood btu's, and charge you for unreported income on the difference. And once you've burned it, be very, very careful where you spread the ashes, or that could count as fertilizer on which you've failed to pay taxes.

Whatever are they teaching in the schools these days?