Taxes.... I'm not getting something

[4luv2cdisney]

I generally hope I'm getting some sort of return. BUT, I don't do it for enforced savings.
I run my own business and it's difficult to estimate my taxes on my own. So, rather than pay an accountant an obscene amount of money to figure my quarterly payments, I pay a straight percentage of my income (without taking out any expenses), which generally results in getting "something" back at the end of the year.
One year I tried figuring my quarterlies myself and ended up paying in. I didn't like it, so I won't be doing that again. I didn't like owing $2,500 at tax time, and it's scary to think that I could get further off than that. So, I'll just keep overpaying and getting some sort of return.

We have some "side job" earnings every year. The amount varies greatly from year to year. I estimate high (take out of our regular paychecks) to make sure we are covered.

It always makes me angry when people assume I must be stupid because I am getting a refund. I am saving $ on accountant fees or potential penalties! I am most amused by people who are horrified that I may give the gov't a "free loan" but they give their bank a "free loan" by escrowing their taxes and insurance. I do not do that, so I figure it balances out. Anyway, I don't really care what anyone else does with their $ -unless if they are passing judgment on me!

Yes, I'm sure some people do not get a big refund or owe much on their tax return and do not escrow with their mortgage company. I'm just not that perfect! I could probably figure out my own quarterlies, but my time isn't worth the $25 in interest I gave the Fed.

 

[PrincessKsMom]

As to forced savings, why not reduce your tax withholdings and increase what you contribute to your 401k. Now you have a forced savings that you don’t blow every year… Think long term, retire a millionaire!

As I said in my earlier post, for us it was used to pay for DD's school tuition each year, so saving in my 401k wouldn't help. I believe someone else mentioned using it for a vacation fund.

 

[bellarella]

As to forced savings, why not reduce your tax withholdings and increase what you contribute to your 401k. Now you have a forced savings that you don’t blow every year… Think long term, retire a millionaire!

Some people who get refunds back have already maxed out other tax advantaged savings accounts.

As others have pointed out, there are multiple reasons people get large refunds back. Right now "safe" savings vehicles are paying very little in interest, to the "loss" of the interest free loan is very minimal. For people who don't have cookie cutter taxes, the few dollars in lost interest is often much less significant than the time it would would take (and possibly the hiring of an accountant or tax advisor) to estimate taxes. Additionally, there are often events that are unknown at the beginning of the year that can reduce tax liability. Finally, so what if people choose to use a refund as a savings vehicle? With interest rates at 1% and less for low balance accounts, there is hardly a huge opportunity cost. Certainly nothing that warrants the sort of indignation people seem to have about the issue.

 

[jgates]

It's something so individual for each family. We also each have a part-time job with virtually nothing taken out in taxes. If we didn't claim high on our FT jobs, we could get hurt. We do usually get $3000 back. I'm happy & comfortable with that figure - and I work in a bank! So it's not like I am not thinking about money all the time. I know that when we have extra in a check, it has a tendency to disappear. We now have an emergency fund & we will add a bit more to it from our tax refund. We each also get a bit to have fun with ourselves. Our return on saving it would be .25% APR, so it's a minimal loss.

If you do decide to decrease your withholding, make sure you evaluate your situation after 6 months. Are you definitely saving that difference in pay or applying it to a c.c.? If not, then you would probably be better off having the gov't hold it for you & lump sum receiving it at tax time. Some people will be able to do it & stick with it. Others will not.

 

[DebMcDonald]

I got back almost 3 k this year and I'm super annoyed. I claimed 1 and should have claimed 3. That means that the gov't was holding onto my money that I could have used for savings/ fun/ bill pay etc.
Reading around on the boards and also talking to my friends I hear so many people really happy that they are getting crazy amounts like 8 K, 5 k etc. back in taxes.
So what am I not following? Isn't it bad if you had to wait all year to get your money?

Last year we got 7K back and this year instead of our accountant doing our taxes we are letting our financial advisor and he said "that won't happen again". He said it's much better to have that money in your pocket every week then letting the government have it for a year.