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Calculate your taxes for next year.

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Re: Calculate your taxes for next year.

Postby Dianora » Tue Aug 03, 2010 12:25 pm

Dorvan wrote:All you're doing by over-withholding is giving the government a zero interest loan. I'm not sure why you'd find that desirable.


Because our culture somehow installed the sense that getting a Tax Refund is like mana from heaven. Instead of looking at it as giving zero % interest to the government.
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Re: Calculate your taxes for next year.

Postby Minnerva » Tue Aug 03, 2010 12:58 pm

how did it go from me making a mistake and putting on my forms that i had a dependent on accident to me doing something bad to taxes?
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Re: Calculate your taxes for next year.

Postby Thalia » Tue Aug 03, 2010 1:41 pm

Dorvan wrote:All you're doing by over-withholding is giving the government a zero interest loan. I'm not sure why you'd find that desirable.


Some people do, who knows why. So yes its a 0 gain savings account.

I personally don't like having to worry about owing money to the government at the beginning of the year, so I rather claim less dependents to make sure I am not hit with a bill at the end of the year, instead a refund.
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Re: Calculate your taxes for next year.

Postby fuzzygeek » Tue Aug 03, 2010 1:50 pm

My wife is paranoid about owing on taxes, so she'd rather get a middling-size refund than owe anything. It drives me nuts, but it's her peace of mind. Also, our taxes change so wildly from year-to-year that it's hard to set withholdings correctly.

I guess the obvious solution is to meet with our tax guy quarterly, but then it starts becoming far too much of a time investment over a couple thousand dollars.
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Re: Calculate your taxes for next year.

Postby Dorvan » Tue Aug 03, 2010 2:30 pm

Crazy idea: figure out how much extra withholding you'd be doing...set up a savings account that automatically siphons that much money off of your checking account each month (or each paycheck). At the end of the year do your taxes...if the savings account is more than enough to cover, put the money back in your checking account...instant refund! Plus you can collect interest on the money throughout the year.

Now there are obviously more productive things you could do with that money than leave it in a basic savings account, but even that would be better for you than simply overwithholding, and it'd require no more than 10-30 minutes a year to implement.
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Re: Calculate your taxes for next year.

Postby Dianora » Tue Aug 03, 2010 2:37 pm

fuzzygeek wrote:My wife is paranoid about owing on taxes, so she'd rather get a middling-size refund than owe anything. It drives me nuts, but it's her peace of mind. Also, our taxes change so wildly from year-to-year that it's hard to set withholdings correctly.

I guess the obvious solution is to meet with our tax guy quarterly, but then it starts becoming far too much of a time investment over a couple thousand dollars.


In my case, my investment did quit well in 2008 (just before the housing boom went bust), and the capital gain tipped me well above my declared scale. That year I paid tax penalty for underpayment. The next 2 years I have to do scheduled pre-payment. The last 2 years of almost zero return on my investment have lessen that.
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Re: Calculate your taxes for next year.

Postby Minnerva » Tue Aug 03, 2010 3:02 pm

last taxes i had to pay 1500 dollars back to the IRS. got me so mad.
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Re: Calculate your taxes for next year.

Postby Thalia » Tue Aug 03, 2010 4:04 pm

Dorvan wrote:Crazy idea: figure out how much extra withholding you'd be doing...set up a savings account that automatically siphons that much money off of your checking account each month (or each paycheck). At the end of the year do your taxes...if the savings account is more than enough to cover, put the money back in your checking account...instant refund! Plus you can collect interest on the money throughout the year.

Now there are obviously more productive things you could do with that money than leave it in a basic savings account, but even that would be better for you than simply overwithholding, and it'd require no more than 10-30 minutes a year to implement.


This is not so simple as our taxes are extremely complex. We do depreciation on our home since we use it as a work base as well as most of our computers...our expenses will always vary by thousands of dollars depending on our self employment part. One year we might spend 5k on software and other items, the next year 30k...so no I can't just simply calculate withholdings. Lots of stuff factor in, weather we make the cutoff for the medical credit (8 percent of our income) or not affects it, and I can't know that until the end of the year. A tally of our total WA sales tax will also extremely affect it..so that's hard to pre-calculate also, as well as all our utilities and vehicle millage.

Anyway it doesn't matter now as Mike is completely self employed now and I know no matter what, unless I do quarterlies, we will be owing taxes at the end of the year! Next year I'll start doing quarterlies for the FED's or it will build up.
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Re: Calculate your taxes for next year.

Postby Dorvan » Tue Aug 03, 2010 4:40 pm

All of those factors are relevant for determining your final tax bill, but none of them affect the amount of automatic withholding on your paycheck. My point is simply the over-withholding is the worst possible way of saving for your tax bill. Clearly it's better than not withholding *and* not saving, but setting up fixed automatic monthly savings is no more difficult than upping your withholding amount and is a better move financially.
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Re: Calculate your taxes for next year.

Postby Vanifae » Tue Aug 03, 2010 4:53 pm

I made $0 dollars last year and will do so again this year.

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Re: Calculate your taxes for next year.

Postby fuzzygeek » Tue Aug 03, 2010 5:15 pm

Dorvan wrote:Crazy idea: figure out how much extra withholding you'd be doing...set up a savings account that automatically siphons that much money off of your checking account each month (or each paycheck). At the end of the year do your taxes...if the savings account is more than enough to cover, put the money back in your checking account...instant refund! Plus you can collect interest on the money throughout the year.

Now there are obviously more productive things you could do with that money than leave it in a basic savings account, but even that would be better for you than simply overwithholding, and it'd require no more than 10-30 minutes a year to implement.


This is a good point.

I always tell people to never buy extended warranties on things -- ask the nice sales person how much it is, say no thanks, go home and put that much in a fund. Do this for everything you furnish your house with. When something breaks, use money from that fund, or use that fund to pay for upgraded toys.

I started doing that ten years ago. I wish I'd started twenty years ago.
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