In case you Americans haven’t noticed all of the commercials and internet ads, it’s tax season! (And if you’re me, you also get reminded by a guy in a Statue of Liberty costume dancing by the side of the road advertising Liberty Tax every day on your way home.)
First off. When are your taxes due? Wednesday, April 15. Don’t worry, you have time.
I actually finished my taxes this weekend. I like to be ahead of the curve. Honestly, I enjoy tax season. To me, it’s a bit of a game. Can I get my withholdings set properly so that I receive the smallest amount back?
The answer is no. But I’m getting much better at it.
Most people rejoice at the idea of a large tax refund. But do you know what that refund is? It’s the repayment of an interest free loan that you gave the government. You could be making that money work for you! Instead of letting Uncle Sam hold it for you, you could be putting it into a savings account and making a few bucks off of it. Are you working on paying down your debt? All that money could have gone towards your credit card bills or your student loans or whatever else you’re working on paying off.
Of course, that assumes that you actually will put that money into a savings account or put it towards your bills. For many people, a tax refund is sort of an automatic savings plan. They know that in the spring, they will get a chunk of money that they can use on a bigger purchase.
So it’s really up to you. If you enjoy getting that money back, then go for it. But if you’d like to play the game and try to get that number as close to zero as possible, give it a shot!
Since buying my house, I’ve been terrible at this game. I’ve got my state taxes figured out. In fact, this year I actually owed money. A whopping $30. That’s pretty good, in my opinion. My federal taxes were much further off. Every year, I debate whether I want to try to adjust even more or if I just want to accept that I will be getting money back every year. If my income were more predictable, it would be easier. Yes, I still have my full-time job, but I’ve been picking up more freelance gigs, and that additional income has to be taxed sometime. And the last thing I want is to have to pay a huge chunk of change every spring.
Getting a refund isn’t a bad thing! This year’s refund is going into a few budget categories, being put towards big purchases I’m saving for. It’s not a terrible situation. I’m honestly not sure if I would be disciplined enough to save the money every paycheck. I would like to say that I would find it easy, but I’m not positive.
So for now, I consider it half a win. The state doesn’t get a free loan from me, and the feds repay their loan each spring.
What’s your thought on tax season? Do you get your taxes done as early as possible? Do you hope for a giant refund?
Megan is a 30-something government employee in the Washington, DC area. She got interested in Personal Finance when she got out of college and realized that her paycheck wasn’t going to go as far as she had hoped. Since starting this blog, she has managed to buy a house and make a solid start on her retirement goals, and hopes to help others do the same. Here is her story:
In 2007, I was a gainfully employed 20-something with no debt but not a lot of knowledge about personal finance. It was a co-worker’s comment about Roth IRAs that sent me to the internet, searching for information. It was then that I realized that I really didn’t know a whole lot about personal finance and that my current financial situation was due a lot to inherent frugal tendencies, generous family members, a fear of debt, and good luck. While that was working for me, clearly I needed a better plan.
While I had no debt, I was also pretty much living paycheck to paycheck and not worrying about going over budget (I say this as if I had a real budget) because I had an emergency fund set aside to cover any overages.
Except that’s not what an emergency fund is for.
So I did a lot of research, read a lot of blogs, and decided that I needed a plan. I needed to budget. I needed to know what I was spending my money on. I needed to prepare for the future.
I decided to create a blog not only to make myself accountable to others but also to share the knowledge that I gained along the way. I’ve learned so much from my fellow bloggers, and I hope that my readers can find something useful in what I have to share as well.