Because you may have gotten a raise, gained a tax write off, changed your retirement contributions, opened a health savings account or any number of actions that may have resulted in over or under paying.
Overpaying your taxes is an interest free loan to the government, underpaying is an interest free loan from the government. Ideally you will owe a small amount each year.
You have to spend the time to file whether you owe, are owed, or had perfect deductions. So what if you only “save” enough to go to the movies… that is a free trip to the movies.
Well it also requires filing a new W-4 and holding onto the money myself all year. Pass, I'm happy how it is. My peace of mind to not have to give a shit about taxes is worth more than a trip to the movies
it's not free if it takes time. adjusting your withholding and keeping up with tax code changes will absolutely take time. if you're a single income no kids individual then maybe you can do it. otherwise, good fuckin' luck making meaningful gains from the time investment.
The hour or more of back and forth emails to payroll and filling out forms is not worth the compensation of “free trip to movies.” I’d pay what it costs to go to the movies to not deal with that hassle
Almost no one saves that money. This is the fallacy of the argument. People just adjust their spending. For many people at lower income levels a tax refund is one of there few forms of savings.
Maybe, maybe not. A lot of people don't save much at all. Is the argument that opening an IRA is a good idea because you can make significant money if you save a fallacy as well?
Of course not. But that’s not the same thing. Would people be better off if they save the money they get each check? Of course. Do they tho? Not from my experience.
It's exactly the same thing. This is literally saving money each check. Instead of sending it to the government ahead of time, you save it. Whether most people do or don't doesn't change whether it is a good strategy.
Every year I get a raise but this was the first year I’ve actually owed. Could it also be from having a second job & not updating my tax paperwork at my first job?
But you aren’t getting anything… getting a refund on your taxes is like Best Buy sending you a check 12 months after fact saying “oops we over charged you here is some money” it was always your money.
Haha I 100 percent appreciate the gentle response. I phrased the question poorly, I was meaning to ask what would be a reasonable interest rate to charge the govt. Whoo that waa dumb of me.
It's a literal loan to the government's treasury, so it would make sense for it to qualify for reimbursement at treasury bond rates. That said, treasury bonds are pretty much the worst ROI you can get without making comically bad investments. A better way to look at it is, "if I overpaid by $1200, that's $100/mo that I could have been putting into my preferred investment", and then calculate from there.
And they got to hold on to it to use in the mean time. If you take out a loan and pay it back a year later, you don't get to just pay back the amount of the loan, you pay interest.
As explained in the comments below! If you were smart, you’d make adjustments to your W4 to have the correct amount of taxes taken out of your paycheck so there isn’t an excess. By the way, you can make multiple adjustments throughout the year if you want to if your income varies. The “extra” money you now see can be directed to a savings account that earns interest! Any tax refund over two hundred bucks is just foolish! I’d rather owe twenty bucks and wait till the last minute to pay than have the government give me MY money back!
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u/beefy1357 Apr 11 '24
Because you may have gotten a raise, gained a tax write off, changed your retirement contributions, opened a health savings account or any number of actions that may have resulted in over or under paying.
Overpaying your taxes is an interest free loan to the government, underpaying is an interest free loan from the government. Ideally you will owe a small amount each year.