Wednesday, February 18, 2009

Income tax refunds and you

I just did our taxes this past weekend, in fact, I always do my taxes around the second weekend in February, just after having received all my paperwork. Then, if I owe money (only happened once in a year when I didn't work at all and had some interest income), I wait until April 15th to mail off my check. (I always think of Señora Gomez (Spanish teacher in HS) on tax day, it's her birthday.) If I'm getting money back, I send it in immediately.

There are 2 schools of thought on income tax refunds.

The first is that if you get a refund, you are allowing the government to use your money interest free, and you are actually losing money, because you could have been earning the interest on it.

The second is that, come tax time, you absolutely under no circumstances want to have to pay a dime, because you suck at saving money and you're not sure you'll have it to pay.

I fall in the second category, so for my paycheck (the paperwork I filled out with HR), I always claim at least 1 less dependent than I have, advice I got from my dad that has yet to fail me. Actually, both Clinton and I are on file as single and none. And then we file our taxes married filing jointly, claiming ourselves and Landon and itemizing, we get a much larger refund and are able to do some things with that money annually, that we wouldn't normally get to do. I think of it as a savings account. Unfortunately it's a non-interest baring savings account, but it's a savings account none the less.

This year's income tax refund, is paying! Actually, it's going towards the loan we got for the windows, but that's good enough. Or possibly towards an equal amount of a higher interest other debt.


The Modernish Father said...

We also fall in the second category and I don't care what all the money wizards say.

The fact of the matter is that if we were getting a little bit more in each paycheck, we'd be spending it and not saving it. Insuring that we'll get a refund (or more importantly, that we won't end up owing thousands of dollars) each year is worth not accumulating the pitiful amount of interest that money would be generating at the bank. Or at least is to me. I work in a building of people who'd argue otherwise.

nonsoccermom said...

My father is always yelling about giving the government an interest-free loan, why would I want to do that, I should change my withholding status to married. To that I say, BAH. TMF is right, this is what works for us.

bernthis said...

Hope you don't like in CA? If you recall, they are still planning on giving those IOU's

Carol said...

I'll take the interest free loan to get the windfall of money in the spring. Like you, its usually already spent by the time we get it. But, we put our big purchases on interest free store credit so, we can pay off a big chunk of that with money we'll never miss :)

I started my taxes but am just now getting to finish them because one of the places got an extension on sending us our tax info, didn't tell us so luckily I'm anal and I track exactly what I should receive come tax time.

Valerie said...

I do the same thing you do. I don't care if the Feds are making a few bucks off my extra money. I can do a lot more with a large chunk at once, than with an extra $13 on each check.

I file my returns within MINUTES of receiving my W-2. Seriously. This year, I had everything else completed on the Turbotax website, so it took me about 5 minutes once it came in the mail.

Mama said...

I did our taxes this weekend and almost hit the file button, but something made me wait. Guess what? The super-geniuses at Fluor sent out revised W-2's that arrived yesterday. I don't think it is making a difference in the bottom line, but I'm sure it would have been a big mess if I'd already filed.