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Old 01-25-2013, 12:26 PM   #1
marius97
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I have a tax confession to make

I am an accounting student (adult). Between my wife's good job, deductions for three kids and my school expenses, we always get a really BIG refund. I know that is not advisable because it is giving the government an interest free loan. Every class I take always has at some point a lecture about the evils of big refunds. I just sit there and nod my head in agreement as I think about my vacation being paid for out of our refund. I'm not disciplined enough to save out of each check if we adjusted things to get a smaller/no refund. Even if I was, invariably some of that money would disappear into general household needs. That disappearing money would negate any interest I could have earned by sticking the saved money into something that would earn a small interest rate. I am so ashamed of my big refund but I don't care anymore once we see the Welcome to Florida sign.
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Old 01-25-2013, 12:28 PM   #2
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Done it before myself! Hey how ever you manage to save, right! Now I rely on autodraft to savings out of my checking account- like paying myself!
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Old 01-25-2013, 12:37 PM   #3
Ginny Favers
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I'm with you. Last year my refund was huge. But I am worse.

The worst part about it is, I had no idea it would be that huge. I thought maybe we'd owe. Our income and situation fluctuate so much I will fully admit I have no idea when it comes to taxes. This year, we may owe. We may get a big refund. I admit it. We're idiots.
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Old 01-25-2013, 12:42 PM   #4
Ed J
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Those who preach that are stuck in a time warp. The amount of interest you would collect on a sizable refund (say 5K) would be wiped out going out to 1 nice dinner with the family. A person has to know their limitations.

BTW I would not admit this to potential clients if I were you .

I pay every year so this isnt an issue for me
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Old 01-25-2013, 01:30 PM   #5
2disneyboys
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Personally, I don't want a huge refund, but I don't want to have to pay either.. its a fine line!

However, my In-Laws could not save a nickle if you somehow pried it out of thier hands and put it in a valut they could not acess... yes, its that bad! so them changing withholdings around so that they get a big refund helps them.. thing is you have to know when to time things with that family. If you get married/have an accomplisment/baby etc in Oct, your not getting much from them, but if it happens during tax season, who-hoo!

I agree w/ the prior poster - you have to know your limitations and work with those! (now don't tell your CLIENTS )
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Old 01-25-2013, 01:32 PM   #6
angierae
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I too think that "it's an interest free loan!" is advice for bygone days. Savings account interest right now is so minimal, if it is helpful for you to get the $ all at once, you might as well. You aren't missing out on hundreds and hundreds of dollars in interest.

We almost always owe because my husband has a large amount of self-employment income, so we pay both halves of social security.
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Old 01-25-2013, 01:55 PM   #7
MomToOne
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On a show not too long ago, Suze Oreman even said that since interest rates were so low right now, if it helps you save then go ahead and overpay taxes and get a big refund.

Of course, that is her advice only as long as interest rates stay low.
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Old 01-25-2013, 01:59 PM   #8
buckirj1
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I figure giving the government a interest-free loan is one of the few civic-minded things I do. I've done it for most of my working life. Ain't I patriotic?!?

Looking forward to getting a refund. And yes, since I have little other debt, half will go to savings and the other half will go toward a vacation. What others folks do is their own business.
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Old 01-25-2013, 02:09 PM   #9
danielle79
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Your confession is mine too! I know we should change our withholdings so we basically break even but we utilize this $ as our savings account, and if it was in a savings account it would hardly earn any interest at all plus we would dip into it and use it! We are not very disciplined with savings This year's refund is ear marked for our house roof and next year it will be a Disney vacation!!!!!
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Old 01-25-2013, 02:15 PM   #10
cmwade77
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I have changed our witholdings so that we should break even, but with TurboTax, there is always something that helps us get a large refund.
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Old 01-26-2013, 08:32 AM   #11
davedmaine
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Quote:
Originally Posted by angierae View Post
I too think that "it's an interest free loan!" is advice for bygone days. Savings account interest right now is so minimal, if it is helpful for you to get the $ all at once, you might as well. You aren't missing out on hundreds and hundreds of dollars in interest.

We almost always owe because my husband has a large amount of self-employment income, so we pay both halves of social security.
There's different kinds of interest than just from a savings account. There's a lot of different things you could be doing with the money rather than just let the government sit on it.
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Old 01-26-2013, 08:44 AM   #12
crashbb
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I didn't change my withholdings because of interest or interest free loan or investing or anything. I changed mine because we needed the money to pay bills.

I could care less, I like getting a nice chunk of cash in March to pay for vacation. I have a lot of exemptions and still get $1500 back. I'm not like the others at work though who get $8000 refunds. That's a bit much.
That doesn't really make sense. If you need the money to pay bills, wouldn't it make more sense to reduce your withholding so that you have the money to pay your bills earlier?

I'm another who does my best to end up neither owing nor receiving - and the extra money goes into my investment accounts - starting with my RRSP and TFSA (Canadian retirement account and tax free savings account, respectively) until they are full. That way, I start my tax free savings earlier in the year than I would if I had to wait for my refund.
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Old 01-26-2013, 04:36 PM   #13
foreUT
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Quote:
Originally Posted by angierae View Post
I too think that "it's an interest free loan!" is advice for bygone days. Savings account interest right now is so minimal, if it is helpful for you to get the $ all at once, you might as well. You aren't missing out on hundreds and hundreds of dollars in interest.

We almost always owe because my husband has a large amount of self-employment income, so we pay both halves of social security.
Good advice. Don't think getting a small amount is very beneficial, even if it is weekly.
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Old 01-25-2013, 02:59 PM   #14
ICF
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Those who preach that are stuck in a time warp. The amount of interest you would collect on a sizable refund (say 5K) would be wiped out going out to 1 nice dinner with the family. A person has to know their limitations.
It wouldnt even have to be that nice of a dinner -- $5K of a refund @ 1% interest would be a whopping $50 (actually less than that given that you wouldn't "save" the whole $5K on Jan 1st).

You then of course would have to pay tax on the interest income you did earn.

If it works for you then that's great as long as you aren't paying CC interest or something every month. If that's the case, then you should get more back each paycheck and pay down the CC's.
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Old 01-25-2013, 03:11 PM   #15
LJSquishy
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I have to admit I love getting a refund also. In all honesty, I think of it as a way to "save" extra money throughout the year rather than blow it on something we don't really need.

We are only a family of 2 with one income (no kids) and I remember last year my husband adjusted it so we wouldn't get so much money back. We used to claim zero, now we claim one. We are getting $1500 back this year. I was expecting maybe around $600-$800 and he was anticipating $1000 so we were happy to see the $1500+ number!

100% of that will go directly into our savings account when we get it, and then we will most likely be opening up a second savings account with a higher interest rate (for keeping a minimum balance of $3,000 or so). We are saving for our next house and trying to conceive with infertility issues (which insurance does not cover at all -- even basic bloodwork) at the same time so we're saving every cent we can.

If we would have broke even, or close to it, I know for a fact we would not have that $1500 in our savings account already that we will be getting shortly. So, for us, we're okay with it.

...When we did our taxes, my hubby did say, "I'm submitting our taxes ASAP before the government runs out of money". LOL!
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