Filing your taxes: refund vs pay

Do you prefer to get a refund every year at tax time, or have to pay, or break even?

  • Refund baby!

    Votes: 12 37.5%

  • Prefer to have to pay.

    Votes: 2 6.3%

  • Want to come to close to zero as possible (i.e. pay a little or get back a little).

    Votes: 18 56.3%
  • Total voters
    32
BigClay

BigClay

Knower of useless ZJ things
Joined
Sep 24, 2008
Location
Winston-Salem
Lets discuss whether you like getting a refund back every year and why; or if you rather pay every year and why.
 
I used to want a refund, back when I had enough cash flow to pay the bills - it was kinda a savings account the ex couldn't touch (at least until April/May). Nowadays, I need the cash so the zero option is the new normal.
 
I have always got a refund back. Is there much of a difference between what you get refunded at the end of the year Vs. what you would have to pay?
 
hurt4x4 said:
I have always got a refund back. Is there much of a difference between what you get refunded at the end of the year Vs. what you would have to pay?
Click to expand...

Not sure what you're asking here...?
At the end by the time you sum it all up, it's the same amount of $$ you are paying the government. The only difference is whethere you pay more as you go along, then get some back... or pay less as you go along, then have to make an extra payment... or break even.
Technically the most financially savvy thing to do is to pay as little as possible as you go along, but save the reaiming amount you're gonna owe, let it accrue interest, then pay in April.
However, since you pay a hefty penalty if you owe too much, you can't really hold back *that much* unless you are are in a pretty high income range and the numbers are big. If you do the math of how much $$ you could gain in interest on that $$ before giving it back, even at like 5% it's not really that much $$.... not really worth the risk IMO.

Me - I keep ending up getting a few $k back. I like it b/c it's a nice unexpected surprise. When I do spitball math in Jan, it shouldn't happen, yet it seems to anyway. So I consider that bonus money.
Our rule is, w/ the refund 1/2 is saved/used in some kind of money-smart way, 1/4 is mine, 1/4 hers, for some kind of fun/splurge thing.
 
I prefer the refund. I know I could never save the cash, so when I get it back at the end of the year...it always goes towards a project.
 
RatLabGuy said:
Not sure what you're asking here...?
At the end by the time you sum it all up, it's the same amount of $$ you are paying the government. The only difference is whethere you pay more as you go along, then get some back... or pay less as you go along, then have to make an extra payment... or break even.
Technically the most financially savvy thing to do is to pay as little as possible as you go along, but save the reaiming amount you're gonna owe, let it accrue interest, then pay in April.
However, since you pay a hefty penalty if you owe too much, you can't really hold back *that much* unless you are are in a pretty high income range and the numbers are big. If you do the math of how much $$ you could gain in interest on that $$ before giving it back, even at like 5% it's not really that much $$.... not really worth the risk IMO.

Me - I keep ending up getting a few $k back. I like it b/c it's a nice unexpected surprise. When I do spitball math in Jan, it shouldn't happen, yet it seems to anyway. So I consider that bonus money.
Our rule is, w/ the refund 1/2 is saved/used in some kind of money-smart way, 1/4 is mine, 1/4 hers, for some kind of fun/splurge thing.
Click to expand...

Ok that explained it pretty well. They just hold the same ammount . still somewhat new to me ive olny been doing them for a couple years. It seems like getting a refund helps me have some extra money saved up so i will stick with that.
 
I really dont want to give the .gov an intrest free loan all year. I would rather save the money myself and not have to rely on the IRS to give my money back.



Edit: ^ the above post wasnt there when I started typing my response.
 
I pay in all year then when I get my W2 I take it to this guy and we fudge a ton of numbers and I get more back then I even put in.
 
tireburner1975 said:
I pay in all year then when I get my W2 I take it to this guy and we fudge a ton of numbers and I get more back then I even put in.
Click to expand...

Next year Im using your guy... I got back less than 10% of what I put in this year...
 
tireburner1975 said:
I pay in all year then when I get my W2 I take it to this guy and we fudge a ton of numbers and I get more back then I even put in.
Click to expand...

As a former Big 4 auditor and the son of a business owner who was delinquent on $13k in taxes and has now paid over $100k in penalties and interest on that $13k, I hope you never get audited.
 
UTfball68 said:
As a former Big 4 auditor and the son of a business owner who was delinquent on $13k in taxes and has now paid over $100k in penalties and interest on that $13k, I hope you never get audited.
Click to expand...

I was kidding. I used the free turbo tax online and took the standard deduction. Getting maybe 25% back of what I paid in.
 
Yeah, I have heard some stories so I just use the turbo tax. May could get more but hearing what others say I think I'm doing pretty well, well, getting the most of that 0% loan back.
 
I used to claim 9 and basically pay nearly no taxes through the year, put the $ in a good account, earn interest through the year, and pay in April. I found that after a couple of years, the amount of interest I earned through the year wasn't enough to worry with the time and effort put forth and the stress of dreading the IRS check I had to write in April. So, I folded and just budgeted myself with claiming 0 so that I end up getting a decent refund. Otherwise, I'd be just spending the $ and would have to use even more budgeting not to spend the $ on the buggy or something stupid. So, I end up giving the govt an interest free loan for the year so that I can get a decent refund. It works out for us :)
 
The big refund is nice, but then you think "damn, I could've started saving this money last January myself, and I would've had it in December, instead of letting the man hold it for me interest-free, then have to wait til Feb/March for them to refund it back". No thanks.

I had it pretty well dialed in to pay just a little, but now my wife started working part time, that's fawked it all up. The last few years I've been writing a fat e-check every April.
 
I like getting a big refund...my loving husband would just blow the extra money each week to support our Monster & Jeep addictions. This way, we can put a large chunk of money into savings, buy something pretty for the Jeep (I'm thinking full cage), and buy a case of Monster :rockon:I'm happy, the gov't is happy so its win-win!
 
RenegadeT said:
The big refund is nice, but then you think "damn, I could've started saving this money last January myself, and I would've had it in December, instead of letting the man hold it for me interest-free, then have to wait til Feb/March for them to refund it back". No thanks.

I had it pretty well dialed in to pay just a little, but now my wife started working part time, that's fawked it all up. The last few years I've been writing a fat e-check every April.
Click to expand...

Or you could just operate a year in arrears and put your refund in a Christmas account and not touch it until December.
 
UTfball68 said:
Or you could just operate a year in arrears and put your refund in a Christmas account and not touch it until December.
Click to expand...

How much interest you getting in that Christmas account? You need my investment help :)


On a side note does everyone know the rule of 72?

72/(interest rate)= how many years it takes to double your money.

I.E 72/ 0.5% Christmas account = 144 YEARS!!!
 
EdJonesJeeper said:
How much interest you getting in that Christmas account? You need my investment help :)


On a side note does everyone know the rule of 72?

72/(interest rate)= how many years it takes to double your money.

I.E 72/ 0.5% Christmas account = 144 YEARS!!!
Click to expand...


If you can double my money in 8 months...I'll let you take over my whole paycheck. The purpose of a Christmas account is just a concious effort at saving. Even and outstanding portfolio with most average returns...you're looking at a couple hundred dollars tops from return to present time. That's just too much effort and too little return for average Joe American.
 
UTfball68 said:
If you can double my money in 8 months...I'll let you take over my whole paycheck. The purpose of a Christmas account is just a concious effort at saving. Even and outstanding portfolio with most average returns...you're looking at a couple hundred dollars tops from return to present time. That's just too much effort and too little return for average Joe American.
Click to expand...

If you equalize your taxes to pay even each year you can take 1/12 of your normal refund out of your paycheck each month and save for a full 12 months(or longer) considering you we're a good boy for Christmas.

More time = mo $$$

It's no harder to set up an investment account as it is a Christmas account.
 
EdJonesJeeper said:
It's no harder to set up an investment account as it is a Christmas account.
Click to expand...

well but Uncle Sam sets this one up for you:D

In all seriousness I was just thinking about this before your post, setting aside 1/12th of the expected refund as you go along is probably the way to go.
However - to do this you'll have to decrease your withholding, probably calculated either as a % of income. But on the W-4 you set just a # of allowances, not a % or flat $$ amount. So it'd probably take some "dialing in" to find the right combination that balances out right.
Are there any cool calculators where you can enter your current # of allowances, last year's income & refund, the expect income and figure out how to adjust it to balance to zero instead?
It would be easy if it were linear relationship between # allowances and actual % to be paid
 
Back
Top