lisamarie Posted June 18, 2011 Share Posted June 18, 2011 My sister and I were discussing this tonight. DH claims he has taken more deductions than we actually have and we still have ended up with $5-6K refunds the last 3 years. My sister has hers to the point that she cancels out and doesn't pay or get a refund so she has more all year. I kinda like the big check once a year so we have money to fund major projects. She likes having more money all year long. What approach do you take? Is one way better than the other? Quote Link to comment Share on other sites More sharing options...
i.love.lucy Posted June 18, 2011 Share Posted June 18, 2011 While of course I don't think the govt should have my money to use all year, the truth is I am not as able to save that much and it's quite nice to get a refund. Ours average about $2200, so it wouldn't make as big of a difference monthly as it feels like it does once a year. Quote Link to comment Share on other sites More sharing options...
Rjmakmom Posted June 18, 2011 Share Posted June 18, 2011 We purposely struggle all year just to get that big refund at the end of the year. We got just about $9000 this year, and we were able to fund our Disney vacation, Hilton Head Island vacation, along with car repairs, curriculum, etc. I know us well enough to know that by increasing our monthly paychecks, we would never be able to save up that amount. By January I am anxious for that refund, but it's such an incredible feeling to have that large amount-though fleeting-in our checking account come February.:) Quote Link to comment Share on other sites More sharing options...
mommybee Posted June 18, 2011 Share Posted June 18, 2011 For a few years now we have just taken the bigger paycheck. I just save a bit of money to cover what we owe in a saving account and this way I get the interest all year on my money instead of the government. When I took over my mortgage escrow account I started the savings account. That's how I look at it anyway. It was nicer when savings rates were higher though. Quote Link to comment Share on other sites More sharing options...
Twilight Woods Posted June 18, 2011 Share Posted June 18, 2011 we go for the bigger paycheck. The government does not need to hold on to my $$ nor are they a bank and should not be treated like one. Quote Link to comment Share on other sites More sharing options...
mommybee Posted June 18, 2011 Share Posted June 18, 2011 Plus I don't see it so much as a refund as an overpayment. And we always had to pay off bills with it anyway so it never worked out to any vacation or buying something fun. Quote Link to comment Share on other sites More sharing options...
Twigs Posted June 18, 2011 Share Posted June 18, 2011 bigger paycheck I get the interest all year on my money instead of the government :iagree: Quote Link to comment Share on other sites More sharing options...
Sandra in FL Posted June 18, 2011 Share Posted June 18, 2011 Why would you want the govt to have use of your money all year long? Bigger paychecks please. Quote Link to comment Share on other sites More sharing options...
Aggie Posted June 18, 2011 Share Posted June 18, 2011 Ack...I voted incorrectly. We actually pay in at the end of the year on purpose. For one thing, we get to use the money all year. For another thing, it's *very* real to us what our taxes are. If more people had to pay a lump sum every year to the government, I think there would be a hostile take-over.:lol: Quote Link to comment Share on other sites More sharing options...
mommybee Posted June 18, 2011 Share Posted June 18, 2011 For another thing, it's *very* real to us what our taxes are. If more people had to pay a lump sum every year to the government, I think there would be a hostile take-over.:lol: Yep! :iagree: That has been the biggest shock to me especially with how lousy CA is using my money! Quote Link to comment Share on other sites More sharing options...
Running the race Posted June 18, 2011 Share Posted June 18, 2011 I won't let the government have my money to use interest-free. I prefer no refund and larger checks. Quote Link to comment Share on other sites More sharing options...
myfunnybunch Posted June 18, 2011 Share Posted June 18, 2011 We choose a bigger paycheck and put the difference in our savings where it is earning interest for *us*. Cat Quote Link to comment Share on other sites More sharing options...
Tap Posted June 18, 2011 Share Posted June 18, 2011 We plan to get about $1000 back each year. It isn't a lot, but enough to make sure we don't end up oweing at the end of the year. We like knowing that if an emergency comes up, we don't have to worry about taxes. We use the money to pay our Spring property taxes each year. LOL I used to have a friend who paid their taxes a year late, each year. They felt that each year, money was worth less and less so you should spend money when you get it, to avoid it losing value, due to inflation. They also felt that if you waited to pay your taxes, you were using money that had more 'value' to do so. ie If you get a 10% raise each year, you may earn $20 per hour. If you wait a year, your one hour of labor has earned you $22. These later dollars, have more value because you had to work less time to earn them. So, while they had to pay late fees/fines to the IRS each year, that they were doing themselves a favor. :confused: Just incase you are wondering...they had money issues beyond taxes......I bet you didn't expect that....:lol: Quote Link to comment Share on other sites More sharing options...
cindergretta Posted June 18, 2011 Share Posted June 18, 2011 Just incase you are wondering...they had money issues beyond taxes......I bet you didn't expect that....:lol: Boy, I know some people.... :lol: Some folks are natural born train wrecks when it comes to money and finances!!! Quote Link to comment Share on other sites More sharing options...
milovany Posted June 18, 2011 Share Posted June 18, 2011 I'm in the camp of a large refund, but in our case I guess it's different since we don't get paychecks. We're self-employed for the most part, so our refund isn't based on something we overpayed; our refund is based on credits we receive (the child tax credit, especially, and this past year, the repeat home buyer's credit). But even when we were getting paychecks from an employer, I preferred the big refund once a year. Sure, we could earn the money on interest, instead of the government, but truth be told (as said by others above), we know ourselves well enough to know we'd fritter that away over the course of a year. This way we get several thousand dollars in the bank at once, and once it's there in that big of a chunk, it's far easier NOT to spend it. Whatever works for different people is great! This is what works for us. Quote Link to comment Share on other sites More sharing options...
cindergretta Posted June 18, 2011 Share Posted June 18, 2011 Whatever works for different people is great! This is what works for us. ITA. My dad has always said that money management is mostly mind games. People will use a credit card instead of savings because it is too easy to NOT pay savings back but you *have* to pay the cc back. Or people get big refunds once a year b/c little bits of money per paycheck will get lost in "urgent" expenses. Typically, the wise thing is to *not* let the gov't earn the interest on *your* money. OTOH, if you know that money will disappear with nothing to show for it, then it is wiser for you to get a large refund. It is important (IMHO) to have a solid plan and stick to it, even if it isn't necessarily the "right" way. If it is the way that allows one or another to save, have an emergency fund, stay out of debt, etc., than that is the way *that* person should handle their money. Or you could just spend everything as it comes in, run up credit cards, take on loans, spend money you don't have on things you don't need.... Oh! Wait! I better stop. Now we are getting into the territory of people to whom I am connected. <sigh> Quote Link to comment Share on other sites More sharing options...
milovany Posted June 18, 2011 Share Posted June 18, 2011 Typically, the wise thing is to *not* let the gov't earn the interest on *your* money. OTOH, if you know that money will disappear with nothing to show for it, then it is wiser for you to get a large refund. It is important (IMHO) to have a solid plan and stick to it, even if it isn't necessarily the "right" way. If it is the way that allows one or another to save, have an emergency fund, stay out of debt, etc., than that is the way *that* person should handle their money. Exactly! I don't like the implication that we're making a poor decision doing it this way -- we're making the decision that we know works for us. Quote Link to comment Share on other sites More sharing options...
tntgoodwin Posted June 18, 2011 Share Posted June 18, 2011 I too am in the camp of not wanting to give the government an interest-free loan. However, with our particular situation, I don't pay anything in, yet we still get like $8000-$9000 per year. Quote Link to comment Share on other sites More sharing options...
AHASRADA Posted June 18, 2011 Share Posted June 18, 2011 We have always taken the minimal deductions, in order to receive a large refund at the end of the year. We use it for overseas travel to visit family, as well as unexpected bills and large purchases like a car or appliances. It is highly unlikely that we would manage to save that amount of money if we received it in dh's paycheck throughout the year, so for us, it is a way of "forced savings". We learn to live within the means of the paycheck he receives, and get a "surprise" windfall at the end of the year. It works best for us. Quote Link to comment Share on other sites More sharing options...
Sushi's Mom Posted June 18, 2011 Share Posted June 18, 2011 I voted get a bigger paycheck, but that is not what we do. That's just what I view as ideal. We get back about $7000 a year. I haven't yet figured out how to get that lowered. I just don't have the time or energy to figure it all out. It is nice to get that big check, which we put part in savings and the other part to pay for bills or whatever. I haven't been very good at savings, so it is kind of forced savings for us. I am getting better at savings by having money automatically transferred to a savings account in one back, and have an automatic check sent to a credit union in another state. We don't have an ATM card for the credit union and I hid the checks, so it is difficult to get the money out of that account. Another way I force savings on myself. Another thing I don't like about getting the bigger refund is that feel like I am being double taxed. I have not taken the time to figure out if that is actually the case though. Our state taxes us on the refund we get from federal the previous year. I also worry that we won't get our rfund. This year for instance people were saying that the state didn't have the money to pay the refunds. We did get it, on time, but I was really worried until that money arrived. Quote Link to comment Share on other sites More sharing options...
milovany Posted June 18, 2011 Share Posted June 18, 2011 Another thing I don't like about getting the bigger refund is that feel like I am being double taxed. I have not taken the time to figure out if that is actually the case though. Our state taxes us on the refund we get from federal the previous year. I would check into this -- it does not sound legal. I used to work in the tax industry (not as a specialist, but I learned a lot from working with the accountant who was), and have never, ever heard of this (being taxed on your federal refund). It's not income, you should not be taxed on it from what I understand. Quote Link to comment Share on other sites More sharing options...
Lady Florida. Posted June 18, 2011 Share Posted June 18, 2011 Other. A little of both. We don't want to have to owe, so we usually end up getting a small refund <$500. That we we still get the mostly bigger paycheck but don't have to put that money aside only to pay it out at tax time. Quote Link to comment Share on other sites More sharing options...
Renee in NC Posted June 18, 2011 Share Posted June 18, 2011 I voted get a bigger paycheck' date=' but that is not what we do. That's just what I view as ideal. We get back about $7000 a year. I haven't yet figured out how to get that lowered. I just don't have the time or energy to figure it all out. It is nice to get that big check, which we put part in savings and the other part to pay for bills or whatever. I haven't been very good at savings, so it is kind of forced savings for us. I am getting better at savings by having money automatically transferred to a savings account in one back, and have an automatic check sent to a credit union in another state. We don't have an ATM card for the credit union and I hid the checks, so it is difficult to get the money out of that account. Another way I force savings on myself. Another thing I don't like about getting the bigger refund is that feel like I am being double taxed. I have not taken the time to figure out if that is actually the case though. Our state taxes us on the refund we get from federal the previous year. I also worry that we won't get our rfund. This year for instance people were saying that the state didn't have the money to pay the refunds. We did get it, on time, but I was really worried until that money arrived.[/quote'] Basically, some states give you a deduction for the taxes you paid to federal, so any that you get refunded back to you would be "income" the next year. However, that refund amount that you claim should NOT include the earned income credit or other refundable tax credits. The federal does the same thing with the state taxes/refund - if you itemize, the amount the state refunds to you is "income" the next year. BTW, I checked "other" because we pay nothing in but get thousands at tax time. I am hoping this will change in the future! Quote Link to comment Share on other sites More sharing options...
Mynyel Posted June 18, 2011 Share Posted June 18, 2011 M dh and I are IC's, I voted other because we don't pay out taxes throughout the year. It is done when we file. I would rather see a reduction in taxes which would mean we owe less. Quote Link to comment Share on other sites More sharing options...
lisamarie Posted June 18, 2011 Author Share Posted June 18, 2011 We purposely struggle all year just to get that big refund at the end of the year. We got just about $9000 this year, and we were able to fund our Disney vacation, Hilton Head Island vacation, along with car repairs, curriculum, etc. I know us well enough to know that by increasing our monthly paychecks, we would never be able to save up that amount. By January I am anxious for that refund, but it's such an incredible feeling to have that large amount-though fleeting-in our checking account come February.:) But even when we were getting paychecks from an employer, I preferred the big refund once a year. Sure, we could earn the money on interest, instead of the government, but truth be told (as said by others above), we know ourselves well enough to know we'd fritter that away over the course of a year. This way we get several thousand dollars in the bank at once, and once it's there in that big of a chunk, it's far easier NOT to spend it. Whatever works for different people is great! This is what works for us. This is my camp. I like the big refund because then we take the entire thing and put it in savings. We use a small part of it to pay our car insurance which comes due every spring, then the rest is sitting there for big projects. Yes, we could save it ourselves all year, but I already have money automatically transfered into savings every paycheck. So we are saving despite the smaller paycheck. It's not about not being able to save myself. It's the feeling of having a HUGE check come every spring. Quote Link to comment Share on other sites More sharing options...
DarlaS Posted June 18, 2011 Share Posted June 18, 2011 Our state taxes us on the refund we get from federal the previous year. I also worry that we won't get our rfund. This year for instance people were saying that the state didn't have the money to pay the refunds. We did get it' date=' on time, but I was really worried until that money arrived.[/quote'] Are you sure it's not the other way around? I have to claim my state tax refund on federal (because we deduct it), but I've never heard of a state taxing the federal refund. Quote Link to comment Share on other sites More sharing options...
angela in ohio Posted June 18, 2011 Share Posted June 18, 2011 I see no reason to let the IRS keep my money. I can set up an automatic transfer at my credit union which has the same effect, and I get the interest. Quote Link to comment Share on other sites More sharing options...
angela in ohio Posted June 18, 2011 Share Posted June 18, 2011 Basically, some states give you a deduction for the taxes you paid to federal, so any that you get refunded back to you would be "income" the next year. However, that refund amount that you claim should NOT include the earned income credit or other refundable tax credits. The federal does the same thing with the state taxes/refund - if you itemize, the amount the state refunds to you is "income" the next year. Exactly. There is no state tax on the federal refund, there is just an adjustment for a previous credit. Quote Link to comment Share on other sites More sharing options...
Kari C in SC Posted June 18, 2011 Share Posted June 18, 2011 The interest you earn is nearly nothing though. So, in all honesty, if you are not saving at the rate of what your tax return would be... you are not doing all that much better. Most people would not save 9k on their own - it is just a fact. I prefer the lump sum because I pay property taxes and insurance on 3 properties with it. I also fund vacations or home improvements. It works for us, but not for everyone. I just know I read somewhere that the whole putting it in savings and earning your own rate of return was like under $10 in interest. Not really a big deal. Quote Link to comment Share on other sites More sharing options...
angela in ohio Posted June 18, 2011 Share Posted June 18, 2011 The interest you earn is nearly nothing though. So, in all honesty, if you are not saving at the rate of what your tax return would be... you are not doing all that much better. Most people would not save 9k on their own - it is just a fact. It depends on what type of account you have. A generic savings account with no minimum balance will not get you much (though not much is still more than nothing,) but most money market accounts and CDs do better. With all of the different types of direct deposit, you really don't ever have to save it on your own. You do have to resist the temptation to raid the money. But having the money to raid for actual needs throughout the year can be better than the feeling many have that it is "free money" to be spent frivolously. It does really depend on each individual's needs. It depends on so many factors. Quote Link to comment Share on other sites More sharing options...
mommybee Posted June 18, 2011 Share Posted June 18, 2011 Or you could just spend everything as it comes in, run up credit cards, take on loans, spend money you don't have on things you don't need.... Oh! Wait! I better stop. Now we are getting into the territory of people to whom I am connected. <sigh> Sounds just like the people I am connected to as well. Quote Link to comment Share on other sites More sharing options...
melmichigan Posted June 18, 2011 Share Posted June 18, 2011 The last few years we have opted for the refund to pay down our debt (I know my limitations :)). Our goal is almost met and we will be switching to a bigger paycheck. Quote Link to comment Share on other sites More sharing options...
Kelly1730 Posted June 19, 2011 Share Posted June 19, 2011 We like to come out just a little bit ahead. We've only owed once in the 30 years we've been married. Quote Link to comment Share on other sites More sharing options...
Moxie Posted June 19, 2011 Share Posted June 19, 2011 DH is self-employed. What is this refund thing you are talking about :tongue_smilie:??? Quote Link to comment Share on other sites More sharing options...
silliness7 Posted June 19, 2011 Share Posted June 19, 2011 My sister and I were discussing this tonight. DH claims he has taken more deductions than we actually have and we still have ended up with $5-6K refunds the last 3 years. My sister has hers to the point that she cancels out and doesn't pay or get a refund so she has more all year. I kinda like the big check once a year so we have money to fund major projects. She likes having more money all year long. What approach do you take? Is one way better than the other? Bigger Paychecks. No reason for the government to borrow your money interest-free for up to a year. In a perfect world you would invest the money yourself and at the end of the year you would actually have more money than the refund check would have been because that money would be earning interest for YOU for that year. Of course, in an un-perfect world, if we have more we spend more and don't really see the investment opportunity especially if money is tight. So for some the refund is forced savings that they wouldn't have saved otherwise. Quote Link to comment Share on other sites More sharing options...
LauraQ Posted June 19, 2011 Share Posted June 19, 2011 IF you are investing your money (even if it is just to put it in an interest-bearing savings account) then it is best to have more money all year long. This way, your money is earning you even more money all year long. The IRS doesn't pay you interest on the money you overpaid to it all year long. Still, we try to plan it so that we take enough deductions that we get as close as possible to being even with the IRS at the end of the year so we don't owe much or get much back. Quote Link to comment Share on other sites More sharing options...
StaceyinLA Posted June 19, 2011 Share Posted June 19, 2011 I will add that Louisiana absolutely taxes you on your federal refund the next year. You have to include it in your income total. Quote Link to comment Share on other sites More sharing options...
TravelingChris Posted June 19, 2011 Share Posted June 19, 2011 I voted other. We have usually been getting back about 2-3K but that is about the amount I feel comfortable with. THis is how in most years, when we have set up the withholding, the amount that has been overwithheld. But is varies somewhat and we can't predict it exactly so I would rather overpay a little bit than pay at the end. This year, we will have a very complicated return. There is no way I will be able to correctly guess what our withholding should be. I am keeping it the way it is for now and expect that we may well get a much larger refund. But because we are changing investments, putting a new one in college, another one will still be a dependent because he didn't move out soon enough, and buying a house, we can't figure it right. Quote Link to comment Share on other sites More sharing options...
chicagoshannon Posted June 19, 2011 Share Posted June 19, 2011 Why give the government more money than required? We take as many deductions as we can and always hope to come out even. We can invest the money ourselves and collect our own interest. Why let the government collect the interest we should be? Plus with the governments track record with money handling skills I wouldn't trust getting our money back if we were overpaying in the first place. One of these years the government isn't going to be able to refund peoples money. Quote Link to comment Share on other sites More sharing options...
DawnM Posted June 19, 2011 Share Posted June 19, 2011 We try to get bigger paychecks but we always end up with a large refund. For 3 years it was because of the adoption. They are tax credits so there wasn't really a way to make those into bigger paychecks. It is still somewhat that way. We claim as many dependents as we can and still have a refund due to child tax credits and some other things. We don't get as much of a refund, but it is still a refund. I would prefer more per month. Dawn Quote Link to comment Share on other sites More sharing options...
regentrude Posted June 19, 2011 Share Posted June 19, 2011 Rejoicing about a fat tax refund is psychological - financially it is smarter to save the money during the year and make it earn interest. Quote Link to comment Share on other sites More sharing options...
regentrude Posted June 19, 2011 Share Posted June 19, 2011 Yeah, but with interest rates at 1/10th of a percent it hardly matters. We opt for the bigger paycheck, but I don't know that it means much more money in the end. We have a high yield (HAHAHAHA) savings account that I think is at 1% now. Well, there are other ways to invest - savings account is certainly not a good option right now. And even if one decides to SPEND it all, you have more money if you do so during the year, rather than waiting for the refund, because of inflation. Quote Link to comment Share on other sites More sharing options...
regentrude Posted June 19, 2011 Share Posted June 19, 2011 Yes, but that is for people who have money. :D ??? Not sure I understand. You don't need big money to invest in funds. The OP and several others were talking about several thousand dollars tax refund... to me, that IS money. Quote Link to comment Share on other sites More sharing options...
DarlaS Posted June 19, 2011 Share Posted June 19, 2011 We try to get bigger paychecks but we always end up with a large refund. For 3 years it was because of the adoption. They are tax credits so there wasn't really a way to make those into bigger paychecks. It is still somewhat that way. We claim as many dependents as we can and still have a refund due to child tax credits and some other things. We don't get as much of a refund, but it is still a refund. I would prefer more per month. Dawn Right. This is the main reason why people claim all the deductions they are allowed lately, and still get a big refund. The child tax credit. There is no legal way around that that I know of. Quote Link to comment Share on other sites More sharing options...
DarlaS Posted June 19, 2011 Share Posted June 19, 2011 Actually there are ways. There are worksheets out there that can help you narrow it down pretty close. I got $200 back despite that, but still that is pretty close. Had I just filled out the traditional quick sheet it would not have been close at all. Where it gets dumb are with the state taxes though. I can't seem to get it close. They just don't allow one to do that (probably on purpose). Ah, so there is an advanced version of the W4? State taxes are always pretty close for us. We're always relieved when we don't owe. Quote Link to comment Share on other sites More sharing options...
ColoNative Posted June 19, 2011 Share Posted June 19, 2011 I would rather have my money and invest it - if you're getting a 3K refund, you could invest that over time and get more money. I will give as little of my money to the govt. as possible - it takes more discipline to save on my end, but the final result is better. I don't mean I won't pay taxes, but I sure won't pay more than I need to just to get a refund. I would rather come out even on the end and hang on to my own money....:lol: Quote Link to comment Share on other sites More sharing options...
angela in ohio Posted June 19, 2011 Share Posted June 19, 2011 It is still somewhat that way. We claim as many dependents as we can and still have a refund due to child tax credits and some other things. We don't get as much of a refund, but it is still a refund. You can claim as many exemptions as you want. If you use the IRS' withholding calculator instead of the form employers give you, you will be able to get an accurate number of exemptions for little to no refund. It takes into account the child tax credit, as well as any itemized deductions. Because of taxes, a rental loss, the child tax credit, and our itemized deductions, we would get a huge refund if we used the standard form, but using the calculator lets me get it down to the $100-200 range. Quote Link to comment Share on other sites More sharing options...
angela in ohio Posted June 19, 2011 Share Posted June 19, 2011 I will add that Louisiana absolutely taxes you on your federal refund the next year. You have to include it in your income total. The only spot I see on the Louisisana form for anything about your federal income tax is that you subtract it on line 9 on the first page, so that the state doesn't tax you on the amount you owed the federal. Where do you have to put the refund amount? Quote Link to comment Share on other sites More sharing options...
Marylou Posted June 19, 2011 Share Posted June 19, 2011 Yeah, but with interest rates at 1/10th of a percent it hardly matters. We opt for the bigger paycheck, but I don't know that it means much more money in the end. We have a high yield (HAHAHAHA) savings account that I think is at 1% now. Have you checked this out? (No, I don't work for them!) www.checkingfinder.com Quote Link to comment Share on other sites More sharing options...
Josie Posted June 19, 2011 Share Posted June 19, 2011 For another thing, it's *very* real to us what our taxes are. If more people had to pay a lump sum every year to the government, I think there would be a hostile take-over.:lol: Yep!!!:iagree: Quote Link to comment Share on other sites More sharing options...
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