Thanks to TurboTax, I finished and submitted my tax returns this weekend.
Well, on the up side, I didn’t owe any money, a significant change from last year.
But in trying to balance that, I ended up paying too much in taxes, so I’m getting back around $2000. So I need to make some adjustments.
The state tax will be easy to adjust. After I owed so much last year, rather than adjust my allowances, I just had an additional $30 withheld. $30 was an estimate and it turned out to be too much. So I just need to reduce that amount a little bit. I can do that very easily online, so it’s not a big deal at all.
Federal tax will be a little bit more confusing. I did find a really helpful site though. TurboTax has a chart that estimates approximately how much each allowance is worth per year. So as a single filer, if I make $50,000 a year, each allowance is worth about $913. Since my tax refund was more than $913, I should be able to take one more allowance, get an extra $76 a month (according to the chart), and still be fine for my 2010 taxes.
The question is whether or not I actually want to do that. I always say that I want to break even. But I much prefer getting money back to owing money. The smart thing to do would be to take that extra allowance and put that $76/month into a separate savings account and let it grow. Even if I do end up paying money back to the government, once I’ve finished my taxes next year, I can take all that money and treat it like my own personal tax refund.
So I’m going to sit down and think about what my financial situation is going to be over the next year and then make a decision. I am pretty excited to see this year’s tax refund though – I think it’s all going to go into my vacation fund.
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