Getting a Tax Refund is Bad

[kenny]

They do not pay you interest and you could had the use of your own money all year.

It is better to write a check every year to the IRS.
Ideally the check would be as large as possible, but not so large that it incurs a penalty.

Why are people so happy they get a refund?

 

[April20]

I would absolutely prefer to get a refund. I look at it as forced savings. Yes, I could put the equivalent of the money aside every pay check and earn minimal interest, but the reality is we wouldn''t. It would get frittered away and I can guarantee you that I couldn''t point to one single thing it purchased. I would much rather get a refund and we able to spend it on a vacation, something we need for the house or something we''ve been saving for.

 

[lilyfoot]

Date: 3/27/2010 5:55:43 PM
Author:kenny
They do not pay you interest and you could had the use of your own money all year.

It is better to write a check every year to the IRS.
Ideally the check would be as large as possible, but not so large that it incurs a penalty.

Why are people so happy they get a refund?

I have no idea.

I make sure my refund is extremely minimal each year.

 

[Clio]

I try to break even. Last year, though, I miscalculated a couple of things, and my husband''s 1099 income was less than usual, so we waaaaay overpaid. We''re getting a big refund, which is fine, except that I could have at least stuck that money in an interest-bearing account.

 

[elle_chris]

Date: 3/27/2010 6:08:36 PM
Author: April20
I would absolutely prefer to get a refund. I look at it as forced savings. Yes, I could put the equivalent of the money aside every pay check and earn minimal interest, but the reality is we wouldn''t. It would get frittered away and I can guarantee you that I couldn''t point to one single thing it purchased. I would much rather get a refund and we able to spend it on a vacation, something we need for the house or something we''ve been saving for.

exactly.

 

[Hera]

Date: 3/27/2010 6:08:36 PM
Author: April20
I would absolutely prefer to get a refund. I look at it as forced savings. Yes, I could put the equivalent of the money aside every pay check and earn minimal interest, but the reality is we wouldn''t. It would get frittered away and I can guarantee you that I couldn''t point to one single thing it purchased. I would much rather get a refund and we able to spend it on a vacation, something we need for the house or something we''ve been saving for.

Couldn''t have said it better!

 

[PumpkinPie]

I agree with you Kenny - but it''s an immediate reward type of scenario.. if it''s in a big chunk of money at once instead of spread over the year, people feel it is more significant and some also see it (as said previously) as a way to enforce savings

 

[somethingshiny]

Date: 3/27/2010 6:08:36 PM
Author: April20
I would absolutely prefer to get a refund. I look at it as forced savings. Yes, I could put the equivalent of the money aside every pay check and earn minimal interest, but the reality is we wouldn''t. It would get frittered away and I can guarantee you that I couldn''t point to one single thing it purchased. I would much rather get a refund and we able to spend it on a vacation, something we need for the house or something we''ve been saving for.

yup. We actually have them pull much more than necessary, it''s our only way of saving any money. DH can''t put money in a bank and leave it there, so this enables us to have some savings.

 

[LaurenThePartier]

A good portion of my salary comes from commission, but it''s next to impossible to know how much the next year will yield, so I''ve had a bit of difficulty managing the correct witholdings, while predicting my husband''s freelance income.

I''ve come close to breaking even once, I''ve owed a few times, but I most often get a refund of some sort.

 

[honey22]

I look at it as forced savings. I don''t care what the government does with it while they have it, as long as I get it back come tax time! It''s always nice to get a little lump sum in the winter, brightens up my day

 

[marcy]

I would rather pay a bit than get a big refund. Some years have been painful coming up with what we owe but we adjusted our withdrawals and now usually owe a few hundred.

 

[iheartscience]

Date: 3/27/2010 6:08:36 PM
Author: April20
I would absolutely prefer to get a refund. I look at it as forced savings. Yes, I could put the equivalent of the money aside every pay check and earn minimal interest, but the reality is we wouldn''t. It would get frittered away and I can guarantee you that I couldn''t point to one single thing it purchased. I would much rather get a refund and we able to spend it on a vacation, something we need for the house or something we''ve been saving for.

Another ditto!

 

[Irishgrrrl]

Date: 3/27/2010 11:32:51 PM
Author: thing2of2

Date: 3/27/2010 6:08:36 PM
Author: April20
I would absolutely prefer to get a refund. I look at it as forced savings. Yes, I could put the equivalent of the money aside every pay check and earn minimal interest, but the reality is we wouldn''t. It would get frittered away and I can guarantee you that I couldn''t point to one single thing it purchased. I would much rather get a refund and we able to spend it on a vacation, something we need for the house or something we''ve been saving for.

Another ditto!

Thritto. I would NOT save that money . . . I''m soooo not disciplined enough!

 

[Cehrabehra]

Normally we don''t get much back (define "much"), but right now our taxes are such a flipping mess. In 2009 my husband worked in Ireland, USA, and for 1 way too complicated day (literally) in China. We *arrived* Dec 31 and he has to make a tax claim here lol. I am pretty sure we don''t have to pay but I don''t know beyond that. If it all works out as it should, we should still be paying the same amount we would have with a lot of financial dancing, but I dunno. Last year after having only 1 month in europe we got back more than we did the year before.

 

[Haven]

I agree with you, Kenny.

We much prefer to owe at the end of the year. Before I met DH I almost always got a refund (especially because I was almost always a student while working) and it always irked me that I had paid money that could have been earning interest for me.

Now that I''m married to DH we never get a refund.

 

[megumic]

Eh, interest rates are not even meeting the cost of inflation this year --- not certain it makes a lick of difference on ''09 tax returns. But in general, I totally agree that paying back the IRS is better than receiving from the IRS.

 

[Abril]

We haven''t had a refund in years. It''s much better to owe the government if you have plans for the money. For us, in 2009, that meant investing as much as possible.

 

[steph72276]

Agree. We try to break even.

 

[Lynnie]

We usually break about even, but due to some circumstances last year (DH going part time, first time homebuyers credit), we''re getting decent refund.

I think some people like to have a ''forced savings'', and overpaying the IRS is just about the easiest way you can do it. I know a lot of people who use their refunds for vacations.

I''m trying to figure out my taxes for next year already... itemizing with mortgage interest and all.

 

[mayerling]

I was just refunded about 1000 pounds and, yes, getting a tax refund is great!

Here in the UK people pay taxes on a pay as you earn system, which means the government deducts part of your salary before your employer actually gives it to you. And let''s face it, the government screws up all the time. So last year about this time the government took out of my salary a lot more than they should have done in taxes (money that I sure could have used at the time). And because everything is done via PAYE you have to be refunded by your employer also via PAYE. So it took me about a year to get them to admit that they overcharged me and to give me my money back.

Tax refunds rock!

 

[studyer83]

Date: 3/28/2010 12:21:40 AM
Author: megumic
Eh, interest rates are not even meeting the cost of inflation this year --- not certain it makes a lick of difference on ''09 tax returns.

Agreed. In a country with what used to be a negative savings rate (may have gone up?), I figure the small amount of interest I loose is just the cost of living in and imperfect society.

My biggest gripe with it has nothing to do with the interest free loan. People (a generalization -- I realize some of you will be able to tell me to the .00%!) have NO clue what their income tax actually is! Instead of realizing "I pay 20%, 30%, 37%" of my income to the federal/state government, people view tax time as when they get BACK $500 from the government.

I would keep the same witholding rates but require that your employer issue you a check to mail into the government. Yes, there are transactions costs in doing so. But I think there are true costs in the current system where people are not aware of what their tax rate is.

 

[Puppmom]

I try to break even and we usually end up with a small refund. I''m not so sure about this "forced savings" business. A lot of people I know end up supplementing their income all year with credit cards, say they''ll pay them off when they get their big return, then end up purchasing a big ticket item instead. Bad!

 

[zoebartlett]

Date: 3/27/2010 6:08:36 PM
Author: April20
I would absolutely prefer to get a refund. I look at it as forced savings. Yes, I could put the equivalent of the money aside every pay check and earn minimal interest, but the reality is we wouldn''t. It would get frittered away and I can guarantee you that I couldn''t point to one single thing it purchased. I would much rather get a refund and we able to spend it on a vacation, something we need for the house or something we''ve been saving for.

This is how I look at it too.

 

[jcarlylew]

Date: 3/28/2010 10:18:47 AM
Author: ZoeBartlett

Date: 3/27/2010 6:08:36 PM
Author: April20
I would absolutely prefer to get a refund. I look at it as forced savings. Yes, I could put the equivalent of the money aside every pay check and earn minimal interest, but the reality is we wouldn''t. It would get frittered away and I can guarantee you that I couldn''t point to one single thing it purchased. I would much rather get a refund and we able to spend it on a vacation, something we need for the house or something we''ve been saving for.

This is how I look at it too.

ditto - plus my refund is usually only around 100-700 (depending on how much i pay back on my student loans, ect). So thats about 58 extra a month, or 29 a paycheck, which I can tell you right now i would not save.

now, if I was getting over a hundred back on my paychecks, that would be different.

 

[perry]

Kenny:

I agree with you in principal; but keeping my withholding straight is too complicated.

I have a base salary at work - and I have managed to get my withholding basically in line with that.

I can receive bonuses and significant OT (and it varies each year). There is no way to file revised W-2''s with my employer for these when they occur.

I have a Schedule C side business - who''s income is not steady. This adds to the complications.

Bottom line - the way I have it set up: I get a refund every year as it''s the easiest method (and my time is worth more $$$ than I could make by putting the money in an interest account). Some years I don''t get much back; other years I get thousands back.

Perry

 

[JSM]

Date: 3/27/2010 5:55:43 PM
Author:kenny
They do not pay you interest and you could had the use of your own money all year.


It is better to write a check every year to the IRS.

Ideally the check would be as large as possible, but not so large that it incurs a penalty.


Why are people so happy they get a refund?

My husband agrees with you 100%, and we fought over withholdings! He''d rather pay the IRS at the end of the year, I would rather get a refund. In principle, he''s right... but in practice, he''s a lousy saver.

So at the moment we have it set up to (hopefully) break close to even.

 

[yssie]

ITA kenny.



No refunds for either of us here.

 

[RaiKai]

Date: 3/28/2010 8:21:10 AM
Author: mayerling

Here in the UK people pay taxes on a pay as you earn system, which means the government deducts part of your salary before your employer actually gives it to you. And let's face it, the government screws up all the time. So last year about this time the government took out of my salary a lot more than they should have done in taxes (money that I sure could have used at the time). And because everything is done via PAYE you have to be refunded by your employer also via PAYE. So it took me about a year to get them to admit that they overcharged me and to give me my money back.


Tax refunds rock!

In Canada, if you are employed, your employer remits your taxes before giving you the net income (usually, there are some exceptions, and this is not the case for the self-employed, etc). They just go off of your salary and the related tax bracket for that salary. This means that it does not take into account all the places you can have deductions (i.e. tuition, loan interest, charitable donations, registered retirement savings plan contributions, moving to another province with lower taxes, having dependent children/adults, changing salaries through the year or changing jobs, child care, moving expenses, and so on) so often you have had higher taxes remitted than you actually need to pay once deductions are factored in. Meaning, tax refunds (or tax owing). There are just so many ways to "save" taxes payable or reduce the income on which taxes are payable that it is difficult to "get it right" in the first place as you can't account for all of those until the end of the year.

I love tax refunds as due to living quite on budget, I get a nice chunk of money at the "end" of the year I might otherwise not have been able to save. And, this year, I am getting back about $3,500 (my husband is getting back $3,000 - here you file as individuals not as a household) which is buying my new rings...!!!! For me, I will be getting refunds for the next few years equal to what I paid in taxes simply due to my tuition payments in past years. While I *could" technically ask my employer to remit less, I would rather get money back than owe at the end of the year just due to how our current budget operates, and even then it likely won't be right as I also have other expenses/deductions to take into account.

We also get refunds if we have overpaid into the Canada Pension Plan, etc for some reason (i.e. changing salaries, etc).

 

[luv2sparkle]

We usually get a pretty hefty refund. We also use it as an additional savings account. We save regularly, but sometimes we have big expenses as well, so I am always happy to get it, and not have to
touch our long term savings.

 

[Kismet]

I agree that deliberately large refunds are a bad thing, especially now with the economy so bad. It would really suck if the government told you that "yeah we know we owe you money but we''re not paying it to you because we can''t afford to." Aren''t some states delaying paying out their refunds already?

I haven''t looked at savings account options recently but is it so impossible to get an account where you can get direct deposit but not an ATM card, checks, credit card access or online banking; an account where you actually have to go into the bank to get at the money?