Federal: $89. (Effective Tax Rate: 15.88%)
So hooray! $554 back in my account. But, if you’ve read personal finance books and blogs in the past, you know that I SHOULD be sad. I gave Uncle Sam an interest-free loan. But guess what? I’m okay with that. The government had $89 of mine that I would have had. And I gave Massachusetts an interest free loan of almost $500. WHATEVER.
I don’t care about that. Because the alternative would have been that I had saved all that money the whole time. First of all, that’s not quite accurate, because it would be more like $39 per month. But seriously, at interest rates being where they are, even on so-called “high interest savings accounts”, earning 1% interest on that money wouldn’t have been helping so much.
I figure that, since my tax situation isn’t very complicated, I only have a few deductions/credits that affect me, so I don’t expect to owe too much or get a refund of much each year. I don’t ever aim to get a HUGE refund, just whatever the tax credits give me.
Some people advocate OWING as much as possible come tax time. Then wait until the last day possible to pay it. I know I could have modified my withholding to make it so I would owe the government money. But that honestly makes me uncomfortable. I’m not familiar enough with the tax codes to know how to underpay my taxes without getting in trouble. If you underpay your taxes too much, you will get hit with penalties. I know THAT much. If someone has an easy way to figure out how to owe the most without getting penalized, I’d love to hear it.
Wisebread posted a similar discussion with 5 Reasons It’s Okay to Get a Tax Refund. I’m pretty much agree with points 1, 2, and 5. I don’t use my tax refund as an alternative for an emergency fund. I assume it’ll be something small and not a big deal.
So, what’s your tax plan? Do you try to owe as much as possible? Do you try to get a huge refund? Or do you try to stick close enough to $0 difference as possible?