So after the response I received from the thread in the bow hunting section I thought I should create a thread here. Without getting into too many details... What do you do for your taxes and why? I'm 26 years old and have been out of college for roughly 4 years and have always claimed 0 so I get a good chunk of money back come tax time... But I am clueless on what I really should be doing. As I hear on the other thread, I should be claiming 1 and throwing the extra money that's not taken out into my savings and paying in at the end of the year if I have to. How do you determine if you pay in/don't pay in? What things do you need to watch or do in order to come out even at the end of every year? As I stated... I do not know much about taxes and why I should/should not claim this or that so hearing some responses should be a good learning experience for me.
In your case it's simple. Do you like getting the check back every year? If you claimed 1, could you save that amount throughout the year, or would you spend it? You will not earn any interest worth a damn in 1 year in a savings account by sticking $100/month into it. It really is up to you. with that said...I wish I got money back from taxes still. I'm dreading writing that check this year.
I would be saving it... But like you said, it would be around $250 a month. I saved the majority of my tax return I got this year and put the rest toward student loans.
The way that I look at it is that if you are getting a good chunk of money back at tax time, you are letting the government use your money, INTEREST FREE, for all of that year !! Why do that ?? It may take a few years and a few jobs, if you hop once in a while to get it to the point where your getting all the money you can on every paycheck and not getting a big refund at tax time. If you can set your withholdings so you get less than $500 per year refund, you are doing pretty good. That means you are getting all your money the way you should. That would mean you are within $10.00 a week on your paycheck. It's hard for a guy like me when you are on commission, your pay fluctuates every year, but I have it pretty close, I do get a refund but not a very big one, thats the way I like it. If you have to depend on your refund for an income, then you better start looking at your spending habits !!!
ugh people still say this every year, but he isn't going to earn much interest in a savings account by adding $250/month he might earn $10 worth of interest the entire year like I said, it all depends on if the person has the discipline to actually save or not, if they can't, by all means, allow the government to save it for you
For me, it works out better to just get the refund. Sure, I could save it on my own, but I would probably just find a way to spend it. We like to put it in the bank and use it for things outside our normal spending. I treat it just like I treat my bonus from work. I don't really care that the government is using though out the year, as long as they give it back to me. My bank is doing the same thing, and I'm barely making any interest in those accounts.
If either way you are putting it in savings, really it doesn't matter. In my case, we get about two grand refund every year. We always use that money to go on a trip somewhere warm or do something we ordinarily wouldn't do. Sent from my iPhone using Tapatalk
I claim 2. I still get some refund $ each year. This makes it easier for me to contribute a higher rate on my 401k throughout the year. It's a no-brainer in my eyes. Why would I want to wait longer to receive $ I know I am entitled to?
Heck you are young and single done with college, do what ever you want enjoy the freedom of it. Won't be long and you will be settled down with what seems like more obligations and responsibility every year, so make hay while the sun is shinning.
If your not maxing out your IRA's or other tax deferred accounts yearly it would be beneficial if you could allocate your extra monthly withholding into your IRA. This would also lower your taxable income. All this provided you have 6-12 months cash reserves.
I hate tax time. I really hate being in a higher tax bracket. My wife and I paid in 20k in federal and another 5k in state taxes. We got back a whopping 4500$. That all goes into our savings. On another note. My tax guy was telling me the woman that came in before me(Single with 4 kids) got back 9500. This was with her only making 15k all year total. Doesn't make any sense to me.
uh...wait till you pay that much in taxes throughout the year and then have to write a check to the IRS when April comes around
This is what the wife and I both do. It's nice getting that refund!! It's what we use to take our beach vacation every year. Sent from my Desire HD using Tapatalk 2
This seems to pop up over all the message boards this time of year. I will say hooker is correct in that the concept of giving the government interest free money is somewhat bunk for a lot of folks. In order of what I consider best practices I would says the following. 1)Aim for no refund, but put the difference in net pay into your 401k if available. That way your net stays the same, your monthly savings for retirement is being funded and if you are young, you are letting compounding work for you. Then each year if you are lucky to get a raise, split half for cost of living increase and half to fully fund the 401k. 2)If you don't have access to a 401k and you are spendthrift, take the refund and if eligible fully fund your IRA This will have the added benefit of reducing your taxable income as well. 3)If you are already doing that and still get a refund, pay off your debts.
Our income will increase plenty over the next year/years. I just hate paying another salary in taxes. The thought of sending another check in on top of that is sickening.
