I always file around January 31 or as soon as I get all my paperwork because FREE MONEY. I am currently typing in a bathtub full of $100 bills.
Maybe fear of bathwater-money is why the gas station won't take anything bigger than a $20 after 10pm.
You should decrease your withholding. Over the last year you gave the government free money for free which you're only now getting to claim back.
Everyone should aim to avoid a refund. Aim to have to pay a small amount when you file. Then file at the last minute.
You should decrease your withholding.
Where accountants and therapists agree.
I've heard the argument in 4 and it feels like Tea Party stuff to me. They can borrow my vast fortune for a while and when I get it back, it feels like a bonus. I hope they won't spend it (as my grandmother says when she sends me a birthday check*) on wine, women, and song, but if they do, they do.
*I'm not sure, but I think last year we had a good laugh about the unlikeliness of me spending it, in particular, on the second item in the list.
4: But you neglect the utility I receive from getting an unexpected infusion of $1000+, right when I can really put it to good use waste it. Also, you assume I'm better at managing my money than the evidence bears out. Also: FREE MONEY.
Trying to minimize your tax burden isn't exactly limited to the Tea Party. Right now it does seem pointless. When you can earn .25% interest in a savings account or -25% in the stock market, I'm fine with letting the government keep my money until tax time.
Yeah, not so much Tea Party as some people are just annoyingly disciplined and would doubtless put that extra from each check in savings or something while the rest of us are blowing the extra 20 bucks on a box of wine.
Sometimes, the wine I buy is on sale for $16 a box, which works out to $4 a bottle.
You people drive economists crazy, you know that?
Yeah, where the interest you'd be earning is minimal, there's a lot to be said for forced savings.
I'm too shy to go to HR and fill out the forms to lower my withholding.
The last time I was at the bank they made a big push for me to change my savings account to one that seemed identical in every way except that it was called a "Premium Money Market Fund". So I said sure. Recently the thought has arisen, does this mean it's not FDIC-ensured anymore?
What I mean about the Tea Party is the spirit of "DON'T LET THE GOVERNMENT GET ITS HANDS ON ANY MORE OF YOUR MONEY THAN THEY ALREADY DO." Because, yeah, the amount I'm missing out on in the transaction is negligible, or in fact non-existent since I wouldn't be putting it in anything with interest anyway.
It works out better for me financially if they get to keep it for a while and then I get it in a lump sum as if I'd been saving (which I just wouldn't have been) and I'll probably throw a chunk of it at my student loans as a principal payment.
Or, y'know, what LB said in 12.
I very much wanted to avoid getting a big refund this past year, and filled out my withholdings with that in mind, but it happened anyway! I'm not sure how one is supposed to plan withholdings strategically, since you have to determine them by following a rigid set of instructions. Maybe it's an artifact of only having an income starting the middle of the year, and it'll work correctly next time?
I agree it feels great to get that windfall, but my new job is giving me a better sense of the difference between income and cash, so all else equal I'd prefer the money be in my hands. I can get "returns" far greater than market returns by paying off my student loans early.
14: Money markets are not FDIC insured but since everybody went a bit nuts when one of them failed to keep principal secure, they now have a government guarantee. However, wikipedia says the guarantee doesn't cover new deposits after 2008. Anyway, a money market is very different from a savings account and really fucking pointless (or counterproductive) unless you are getting a higher interest rate.
TaxAct saved me a bundle of money this year. I like to think of myself as the sort of person who does his taxes on paper (because I write computer software for a living, and also, forms to fill out! What's not to like?), but joint filing plus homeownership plus some other weirdness meant that it was trust software or go find an accountant.
18: since you have to determine them by following a rigid set of instructions.
I'd follow the rigid set of instructions and subtract 2 or 3 or whatever, or not update the withholding for years even though my circumstances changed. As a result I've owed a relative fuckton of money most years (penalties once or twice, so maybe not the best role model). Last year I got a refund and was sure I must have made a mistake (even though I had specifically adjusted things). I must say it was pleasant.
12,17:
If I get a lump sum, then it'll just go into my savings account. But if I get a small amount more each month, then after I've done the bills and looked at the balance I'll say to myself that I can afford the small luxury that I'd otherwise forgo.
I like to think of myself as the sort of person who does his taxes on paper (because I write computer software for a living, and also, forms to fill out! What's not to like?)
I did that one (maybe two) years and I hated it. I would be following the steps on the the form and I kept wanting to know what each one meant. I'd read "subtract X from Y and write in line Z" and think, "wait that total doesn't mean anything, why do they want me to write that down?"
Once I finished it was clear that it did all work out in the end but I found it stressful because it really felt like following arbitrary instructions (and it's really difficult to check your work when the instructions are arbitrary) rather than following a rational process.
I much prefer tax software.
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A former student just used the phrase (in writing) "We recently fell pregnant and we are due in August!"
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So is it not illegal (or if illegal, never enforced) to fudge your withholdings as long as you pay the right tax at the end of the year?
I doubt I'll do that now, but I might if next year's taxes create a similar refund.
I didn't know you had been tutor to Queen Victoria - you don't really look quite old enough.
25: Hmm, I always assumed "fuck 'em" since you had to true-up in the end and they had a mechanism (penalties) to punish you if you were off by too much. However, I notice that the W-4 has these words:
Whether you are entitled to claim a certain number of allowances or exemption from withholding is subject to review by the IRS. Your employer may be required to send a copy of this form to the IRS.From which I deduce that they feel have some ability to control what you do during the tax year itself.
The IRS has accepted my e-file, everyone! Beers are on me!
25: This is off the cuff, but AFAIK, while there's no requirement that you set your withholding to what the worksheet says it should be, if you set it way too low, such that your actual tax payment at the end of the year is bigger than a certain amount, there are penalties. I think.
The IRS prosecutes people who falsely claim that they are entitled to have no withholding at all. A prosecution for a minor amount of underwithholding strikes me as highly implausible.
Although you do sign the W-4 form under penalty of perjury.
if you set it way too low, such that your actual tax payment at the end of the year is bigger than a certain amount, there are penalties
This is right, because if you're in a situation where you can expect to have a lot of tax due (like no withholding), you're supposed to be making estimated tax payments. But there are additional conditions for the penalties to kick in, like having owed taxes at tax time the year before, I think.
I tried to do the estimated tax payments, but it seems that you're supposed to do exactly four payments, each of which has a deadline and if you pay past that deadline (the first deadline being in April I believe), there's a penalty.
29: Yes, per 21 from someone who has paid the penalties a couple of times.
30.2: You don't sign the actual workbooks though, just the total number of exemptions claimed (if you say no withholding there are some conditions you need to explicitly say you meet). Nor every year, necessarily. From the form:
Consider completing a new Form W-4 each year and when your personal or financial situation changes.Pretty weak wording. They can force your employer to withhold more if they judge you are underdoing it. Here's an FAQ. They seem to be relying less on W-4s, actually.
Q11: I heard my employer no longer has to routinely submit Forms W-4 to the IRS. How will this affect me as an employee?Note that this is tax advice from a person who is self-admittedly cavalier about the letter of the law on taxes.
A11: There is no change in the requirement that employees have adequate income tax withholding. The withholding calculator found on www.irs.gov is available to help employees determine the proper amount of federal income tax withholding. Another useful resource, Publication 919, "How Do I Adjust My Tax Withholding?" is available on the IRS Web site or can be obtained by calling 1-800-TAX-FORM (829-3676). Individuals who do not have sufficient income tax withholding are subject to penalties. The IRS will be making more effective use of information contained in its records along with information reported on Form W-2 wage statements to ensure that employees have enough federal income tax withheld.
This is not true if you file a 1099.
Having to make estimated tax payments quarterly? Are you sure it's not true? I don't know what I'm talking about but I thought it was true for 1099 as well.
There's some safe harbor stuff, like if you pay 90% of the taxes you owed the year before a big change in this year doesn't trigger penalties but you have to correct it or pay estimated taxes for the following year. Only time I had to pay estimated was in grad school when stipends had no withholding at all.
Anyone know how to find a good accountant? I might start doing consulting this year which means I have to do crazy shit like incorporate myself and get insurance and 1099 self employment estimated holy shit. But I also get to talk about myself in hourly rates and compare to how much hookers charge.
Always thought like 6, but this year 4 seems less picky. Apparently I'm due about 15k back. Who knew?
The IRS does not give a shit how you figure out how many exemptions to claim on your W-4. They only care about whether you pay enough over the course of the year, either through withholding or estimated tax. If you do, no issue. If you don't, you pay a penalty and that's the end of it. They will get pissed off at you if you claim exemption from withholding because you are a SOVEREIGN: CITIZEN, but that's because fraud, not because you didn't slavishly follow the worksheet on the W-4.
Fucking Ohio wasn't properly admitted to the union so the 16th amendment wasn't ratified. The IRS is the fraud, you commie.
Two years ago I completely failed to file. We were owed money, so we figured we could ride it out until last year, when we filed super-early and found we had a lot coming back to us. Then we realized that we'd filed too early, and owed more than we thought. Then I lost the piece of paper that came after we filed, and never found it again.
In any case, we're not in a big hurry to file this year. Maybe towards the end of March.
K-sky is demonstrating the proper spirit.
K-sky is why the government can't be run like Chipotle. There's no cash register with enough buttons for all that.
46: That, plus saying the word "burrito" is now, in fact, illegal in Arizona and Alabama.
43: There is a dissertation waiting to be written about the epistemology of tax protest, but so far even graduate students are not that masochistic.
And if we're getting rid of states, Ohio isn't even much above the middle of the list.
Indeed, Ohio is in a pretty inconvenient location for kicking out.
You people drive economists crazy, you know that?
No no, the new breed of behavioralists love this shit, don't ya know? This is Dick Th/al/er's bread and butter.
you do indeed have to make quarterly payments if there is no employer withholding on your behalf, though you get an automatic extension if you are living overseas. not to delay endlessly, but at least 2 quarters. I am currently the CEO of two foreign corporations (one my store here in narnia, though I'm going to see if I can fight this since it's a 51-49 split with my partner having the 51%; and the other the notional company I formed to buy property in indonesia, which it is otherwise illegal for foreigners to do.) I have had to hire a whole separate, overseas-corporation knowin'-about tax attorney. #firstworldproblemsinthethirdworld I wanted to give my husband the 51% share in our indonesian corporation as a gesture of love and trust but I was there and needed to sign documents, and he was in narnia, so... maybe I'll switch it later. don't laugh at me, divorce attorneys.
52: A bit more like Swaziland, actually, what with being t a border state (sure, the lake, but not an enclave).
the new breed of behavioralists love this shit, don't ya know?
I do know. The classical economists hate it, though.