Monday, February 27, 2006

I did my taxes.

Sigh.
I will get a refund of $1,221 from the feds but I owe the State of New York $107. Last year I got money back from both, totalling almost $2,500.
The only downside to cutting down on my spending is that I end up spending less money on things that could be tax deductible. If I hadn't stopped buying new PDAs twice a year, I'd be getting a bigger refund.
What a game it all is.

9 comments:

Anonymous said...

Congratulations on reducing the size of your interest-free loan to the government. Ideally, you wouldn't have any deductions from your paycheck, and instead put that money into, say, muni bonds. Then instead of loaning the government $1,114 for a year, they'd be loaning you money (which they'd pay you tax-free interest on), and then you'd sell the bonds later to pay your taxes in one huge sum.

Anonymous said...

Bah, backwards. I meant to say, instead of loaning them the money interest-free, you'd be loaning them the money with tax-free interest.

John Gorman said...

Anonymous is right. The best scenario is that you owe nothing and are owed nothing come tax time. If you have to choose one or the other, it's better to owe and invest the difference throughout the year.

In reference to your lower spending, if you want to raise your spending but not spend it on PDA, try giving to charity. It's partially deductible if you itemize.

Single Ma said...

I've never seen anyone break even. The closest I've ever come is owing $377 last year or a refund of $285 this year, which works for me. Gotta be careful with the former because understimating too much results in a tax penalty. Can't win for losing!

John Gorman said...

In theory, the best thing is to break even. As singlemom correctly points out, it probably just about never happens in practice.

The point is that most people get all excited about getting money back, when you really should be bummed because the government's been holding it from you for months...

Caitlin said...

I think Flexo is getting $12 back...that's pretty darn close to even. I use the IRS witholding calculator to try to get as close to even as possible, and I yet I am still getting nearly $500 back (give or take, have to do those non cash donations still)

If your refund is ~ $1200, it's as if you could have had roughly $100 more each month in your pay period if you fiddle with the witholding...which of course will COMPLETELY change when you finally close on your condo ;) (but still, the IRS calculators can be run at any time in the year)

Nina Smith said...

I always get a refund... so guilty as charged. But I think I plead a pretty good case here.

Anonymous said...

How do you get a tax break on PDAs? Isn't there a 2% floor (assuming your job requires them)?

Tim said...

You might get a bigger tax refund but would it offset the expenses needed to take the deduction? That's the question.

You could take more deductions if you owned a corporation or other form of business structure.

In any case, that's a lot more than I'll get back.