The Tax Man Cometh...and Usually Taketh Away
But not this year. And not because I wisely and purposely planned it that way.
Sure, I’ve always been pretty organized, at least when it comes to finances. I kept meticulous records in envelopes and on ledger sheets until the advent of financial software, and in Quicken since. With just a few mouse clicks, I could tell where every nickel had gone, when, and why.
As a result, planning for and paying our income taxes was usually a relatively painless experience. And by design, we always owed Uncle Sam around a hundred dollars, about the same for the good State of California. Occasionally, we’d accidentally get a small refund.
But something changed during the last few years and we’ve owed more than anticipated - way more - and I think I know why. It’s because I’ve become lax. I haven’t kept up with the necessary planning, analysis and adjustments. Maybe the so-called “marriage tax,” had some effect, I don’t know. Anyway, it’s become an unpleasant annual surprise, one I’ve deliberately avoided facing until the very last minute.
This tax season was no exception. I gathered my tax related receipts, printed out the relevant reports and delivered them to our accountant on April 14, expecting we would once again owe taxes. After a mild grimace (he’s become accustomed to my late arrivals), he promised to call me the following day with an estimate of just how much.
But, quite unexpectedly, we’ll be receiving a small check from the State and, even more surprisingly, a fairly decent Federal refund as well! Shazaam! And just when we desperately need to replace our refrigerator and aging computer! A pleasant surprise for a change. Couldn’t happen at a better time!
I suppose if there’s a lesson to be learned from all this, it’s that I need to regain my former state of financial order, recalculate our future withholding so as to owe just a few shekels each year, and deal with the unavoidable future paperwork much earlier. It always feels better when we’ve planned well and know exactly what to expect.
So that’s my commitment. Ask me next April how well we did.
Doug
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Reader Comments (10)
We always withhold extra so we get a nice refund. Then we buy something nice that we both want or take a vacation. I don't know what we would do if we owed money!
Jack always does our taxes and we always get a refund. Sometimes it is enough for a short vacation or we save it for Christmas shopping. I feel sorry for people who owe and didn't see it coming.
That is the way a lot of people do it. They think of it as a forced savings plan. However it is a bad investment. The IRS gets to use your money all year without paying you any interest. A better plan is to calculate your withholding so you owe a few bucks. Then make an automatic withdrawel from your checking account each payday into an investment account or savings account that earn you interest all year. You have the same net pay every pay day, the money is taken out automatically for you (like taxes) only you don't loan it the the IRS for free and you don't have to wait for them to give you your money back. It is a much better plan.
We've come a long way since 1913, many would say for the worse. For some history - and nostalgia - read my post from last year about this time. (Sigh)
Doug
Thanks Joe. That's the recommended system, although for folks who feel they'll spend the money before the end of the year if they have access to it, the "free loan to Uncle Sam" technique might work best.
Doug
All good advise.
Interesting history, that 1913-2008, just 95 years (my grandfather is 96) and the government has grabbed from 1% to the big chunk it takes today just to support itself. It is scary to think where we are headed.
I need some of that organization and planning. Maybe this is the year.
Congratulations! It feels like winning a lottery I bet!
We usually get a refund, it justs happens that way. I like your idea of adjusting the withholding so we get the money in our checks instead of having to wait for it. I will ask my personnel office to do that. Thanks for the tip.
We ALWAYS get a healthy refund. Probably unwise form the investment point of view but we like knowing we get something every year in time for summer vacation. I get your point though.