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Tax Refund Plans

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Ginsu Victim:

--- Quote from: HarumaN on April 08, 2010, 12:27:50 pm ---
--- Quote from: pinballjim on April 08, 2010, 12:23:53 pm ---If you're getting a huge enough refund to consider a down payment on a sports car, you really need to sit down for 10-15 minutes and decrease your withholding.

--- End quote ---

^ I'm with stupid ^

I don't like giving the government interest free loans...

--- End quote ---

Word.

JeepMonkey:
I am not getting a large refund.  I try to get as close to even as I can.  Most years it is pretty close, but I worked a lot of overtime last year that gets taxed at a higher rate than it should.

I definately don't like to let the government hold onto anything of mine that I don't have to.

I will either put it towards the money I have saved up for the car or splurge and put it towards some aftermarket parts.  It will just depend on the car I get.

jamesjones626:
i was getting 4 dollars back from the feds then i decided to itemize so now i am getting a little over 900.  But about 500 of that is going back to state.

Flake:

--- Quote from: HarumaN on April 08, 2010, 12:27:50 pm ---
--- Quote from: pinballjim on April 08, 2010, 12:23:53 pm ---If you're getting a huge enough refund to consider a down payment on a sports car, you really need to sit down for 10-15 minutes and decrease your withholding.

--- End quote ---

^ I'm with stupid ^

I don't like giving the government interest free loans...

--- End quote ---

Meh, while this is fundamentally true, it really doesnt add up to much assuming your a typical American saver.  Lets say you get a fairly large return of $8,000.  Lets say you adjusted your withholding and invested those excess funds throughout the year in a money market savings account transferring the excess of $333 ($8,000 / 24 per periods in a year) immediately via direct deposit.  Assume your money market account pays interest at an annual rate of 1.5%.  For simplicity sake multiply $4,000 * 1.5% = $60 in interest income for the entire year (I used $4K instead of $8K because your not depositing the $8K on January 1st and this assumes a average annual balance).  If your in the 25% tax bracket your only netting $45.  Not much of a benefit.

Now there are other options you have like increasing your 401k contribution and then adjusting your withholding so that you have roughly the same take home pay per paycheck.  Or you could roll the dice in the market with those excess funds as well.

My point is for some who only maintain a money market savings account, it actually probably benefits them to receive a large chunk of money in the Spring rather than an extra $333 per pay period which they will likely spend on other worthless crap like Ipads  ;D.

JeepMonkey:
Keeping the money every paycheck and investing it in a conservative .75% to 1% will not yeild a big gain.  I even went as far as considering (i forget the code, 00, 99?) having no taxes taken out of my check automatically and paying token payments every quarter then pay the remainder at the end of the year, but even this really didn't really produce big gains.

The two main reasons I like having my money every pay period:
1.  I am good with saving money.
2.  Without getting too P&R here, there is no garauntee that the gov't/IRS will send you a refund check.  I believe it was the state of Kansas that suspended refunds one year because the state was way in debt.

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