Wooo Tax Return!

[John]

Just got a huge chunk of change back, how did everyone else do?

[Chris]

I never get a return. Which is good, cause that means every year my income increases.

[Shawn]

I never get a return.

[Sagewing]

It's true - getting a big return really just says that you aren't managing your taxes effectively.

[John]

It's true - getting a big return really just says that you aren't managing your taxes effectively.

The company I worked for last year deducted more taxes then they needed to from my salary, it has nothing to do with my financial managment.

[Sagewing]

Ahh.. Well, I'm not sure how it works in Canada, but in the US the employee can determine the amount of witholding thats taken from their checks. Still, people use the 'default' and lend the IRS money every year, then they are happy to receive a no-intereste repayment from them!

[John]

Could be worse, they could say I owe them money.

[deronsizemore]

It's true - getting a big return really just says that you aren't managing your taxes effectively.


I always get a return...although it's not some huge number, it's about equivelant to my two week pay check. What should I be doing differently? I always thought I was managing things the best I could and that everyone usually got a return. (Keep in mind I am no financial guru)

[bbolte]

i've generally tried to break even each year. but this is the first year that i had to pay in. quite a bit actually. i guess i wasn't paying attention to the finances well enough to realize what was happening. mostly due to my wife going back to work now that the kids are old enough.

[Sagewing]

I always get a return...although it's not some huge number, it's about equivelant to my two week pay check. What should I be doing differently? I always thought I was managing things the best I could and that everyone usually got a return. (Keep in mind I am no financial guru)

When you fill out your tax forms on your first day, you are determining the amount of withholding they will take. This can be adjusted (to some extent) so in your case you might just want to ask your HR department (or whoever handles it) if you can have slightly less taken out. They should be able to help you.

If it's not a lot of money, it may not be worth it. However, if you make 50k/year and usually get back a 3k refund, you could be paying off credit card debt or car loans (saving interest) or investing that 3k (earning interest). If you look at that 3k compounded over 20 years, and add in the additional 3k/year that you could throw in, it can really add up!

[deronsizemore]

When you fill out your tax forms on your first day, you are determining the amount of withholding they will take. This can be adjusted (to some extent) so in your case you might just want to ask your HR department (or whoever handles it) if you can have slightly less taken out. They should be able to help you.

If it's not a lot of money, it may not be worth it. However, if you make 50k/year and usually get back a 3k refund, you could be paying off credit card debt or car loans (saving interest) or investing that 3k (earning interest). If you look at that 3k compounded over 20 years, and add in the additional 3k/year that you could throw in, it can really add up!


So, if I'm understanding correctly, you're saying that hypothetically if I'm getting back 3K a year in taxes, then I should probably take a look at my tax forms and change some things so that I don't get back as much, because you save from paying interest when that 3k comes in your paycheck rather than your tax return?

[Sagewing]

Well, I'm just saying that it's better to get the cash in your hand than let the IRS sit on it all year. You can use that money to your advantage - why not do it ? :D

[deronsizemore]

Well, I'm just saying that it's better to get the cash in your hand than let the IRS sit on it all year. You can use that money to your advantage - why not do it ? :D


That's a good way to think about it. I've always looked at it like it'll be a surprise when I get it. Like it's money that I'm not really expecting and I've been doing fine without it, so when that 1k, or 3k, or whatever amount it happens to be comes in around February it's a very welcomed surprise that I can put in savings, invest, etc.. Maybe that's not a good way to think about it?

[Sagewing]

A lot of people think of it that way. But then, most people dont manage their money well. These small things make a huge difference when compounding interest over long periods is considered.

That money is yours, and you earned it. It's not really a surprise, or a gift, or a bonus, or anythinig else. It's just money that should have been in your take-home pay, but wasnt because the IRS estimates in their favor instead of yours.

It's actually better to do the reverse. My taxes are organized so that I owe a bit at the end of the year. The small about (few thousand) that I usually owe is in my account earning interest until I have to give it to the IRS in April. Why not?

[bbolte]

i'm with sagewing, i'd rather have it through out the year to do with as i please (pay bills, invest, etc) rather than give the government a FREE loan.

[John]

The way it works in Canada (most of the time) is the company you are working for decides how much you should be paying and takes it off your cheque. So most people don't have the option to get taxed less during the year and then owe.

[Hylo]

The way it works in Canada (most of the time) is the company you are working for decides how much you should be paying and takes it off your cheque. So most people don't have the option to get taxed less during the year and then owe.

Same with PAYE in the UK.

[Billyray]

Same in Australia but if you have a legitimate reason for them taking a reduced amount of tax you can get it changed by applying to the Tax Office (in Aus a 221D variation).

Reasons for this might include significant tax deductions (eg from an investment property).

I'd suggest it is similar in UK and Canada.