Graduated Learning: Life after College

I got my degree, I got a job…now what?

I’m getting a tax refund, and I’m happy about it March 27, 2011

Filed under: Personal Finance — Stephanie @ 6:18 pm
Tags: , ,

That’s right.  I finally filed my taxes.  I used the Fidelity discount for Turbo Tax that I mentioned in a previous post.  My refunds are going to be:

Federal:  $89.  (Effective Tax Rate:  15.88%)

State:  $465.

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?

Advertisements
 

6 Responses to “I’m getting a tax refund, and I’m happy about it”

  1. Eric Says:

    Congrats on your refund (interest-free loan or not)! My own tax strategy involves trying to hover around a $0 difference. I’d rather have as little money changing hands as possible! But then again, I don’t get the rewarding feeling of adding a $554 refund into my bank account!

    • Stephanie Says:

      That’s basically my approach, but mostly through not trying to game the system. I fill out the allowances form the way it recommends. Is that what you do?

  2. I take the opposite approach — I try to pay as little during the year as possible, and aim to write a check to the government in April. I also keep money in a money-market account, which gets about 2 percent. But I totally understand the reasons for being happy about getting a refund. When you have more money in your account, its easy to spend it. Getting a refund can help act as “forced savings.” And if you deposit that refund, immediately, into a 401K … well, then maybe you’ll ultimately save more, and earn more in compounding interest over time, than those of us who didn’t get a refund.

  3. Jason Says:

    Taxes…can’t stand them lol

  4. Jess Hall Says:

    I also try to stay as close to $0 as possible, and don’t expect to receive that high of a return. Especially since this was the first year I filled after graduating, so my return was significantly less 😦 I did open a savings account with Aurora Bank and saved that return for a rainy day. Hope you get to learn more about filling taxes. Thanks for sharing this post!

  5. I also try to stay around $0, but getting money back is always a good feeling (even if it was mine to begin with!).

    This year, I also lent uncle sam a good chunk of money. Oh well. Live and learn 🙂


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s