Around this time of year, people start thinking about all the cool things they can get with their tax return. Some folks get thousands of dollars and go on vacation or put some cash down for a new car. A lot of people seem to treat this like the government is just giving them money. That’s not really true though.
Chickens
Really, it’s a tax return. You’ve overpaid and the government is giving you your own money back. Over the course of the year, they’ve used that money to do all sorts of nifty things – from building new roads to bombing brown people.
Most seem to like to get big hulking returns come April. And while I can certainly understand how a chunk of money is nice, I got about things a bit differently.
Rather than having the government take out a bunch each pay period, I have it so that they take out the least amount possible (without me having to pay in at tax time). I think I claim “2″ on my W-4. This ensures that me and Uncle Same basically break even.
I just did my taxes and they owe me $9. For me, that’s lunch. But more importantly, the government wasn’t holding my money hostage until I filed and they gave me a return. Instead, I have the option to put back a bit of cash each pay period myself.
Even if I had tons of exemptions (I have none), I think I’d still do this. Yes, it would be nice to have a big pile of cash in April, but if I am responsible and have the extra dough each pay period, come April, I could have that same amount (or more), making interest on it myself, rather than the government using it for untoward purposes.
Am I making any sense here? I must admit, I don’t have a mind for numbers or financial dealings. I don’t really have enough money to make learning about this stuff worth while. All I know is that I can save just as much as the IRS can withhold and come out ahead (or at least even).
Is there a downside to this?
Actually kids means I get tax credits, and usually end up with more than I actually paid. I get paid fr the kids! USA!USA!
Although this year since j made more money than usual I think we did just about break even. Next year we may even have to pay something!
Kids! Woo! Breaking even is my goal. When I had the bookstore, I didn’t really have any control over this. I paid quarterlies, but they were pretty strict about the amount I had to pay. I always got everything back, though.
Now that I can mess with W-4s in ways I don’t really understand, I can make it so I break even. How does this happen? No idea. Maybe I’m making some big mistake and am missing some golden opportunity where the government magically rewards me for letting them borrow my money for a bit.
If you had a little sideline business you could write off all kinds of things that you’d just spend the money on anyway.
Eric – I like your goal. I think I’d be nervous if I came out at plus/minus $10, but it’s better than knowing they have a thousand bucks of my money. I don’t know if I’d follow your friends advice about writing off all kinds of stuff. You have to basically sign an affidavit that it was used solely for business. Even though I dislike the government taking my cash I still would not be comfortable signing my name to a fib regardless of whom I was lying to or how much I didn’t want them having my money. It’s sort of part of the deal when you live in the land of freedom, apple pie, and lying politicians. Ya know what I mean?
Sean – Oh I definitely know what you mean. When I had the bookstore, I was cautious with write offs. My accountant made it clear what I could and couldn’t use. Mostly, it just became a pain. The easy stuff like miles and dinners were fine, and that’s pretty much all I did. In the end, I’m just happy to not have to have an accountant to file my taxes. The 1040EZ is just fine with me.
Tulasi-priya – I used to do that with the bookstore. I had a great accountant. But at this point, I’m just happy that I can use the 1040EZ again. :)