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.
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?