Over-Withholding
“Next to being shot at and missed, nothing is really quite as satisfying as an income tax refund. – F.J. Raymond
On Friday, Jeanine and I spent three hours with Don, our CPA. If this exercise had taken place back in kindergarten she would have received the gold star at the end of the assignment for organization. Of course, I was missing several required supporting documents and had to locate them over the weekend all because I didn’t fill out my paperwork ahead of time.
One of the pet names given to me by Jeanine is “shortcuts”. According to her, the reason I’m so productive in life is because I cut corners. She makes a solid case by pointing to my reading technique and claiming that it’s more about skimming than reading. Perhaps, this is why I “read” 3 books to every 1 of hers and also squeeze in a stack of magazines including the weekly New Yorker (which requires some superficial reading or you’d never keep up).
Maybe I do take shortcuts but I also live by the touch it once method. The problem though is that I probably should have touched my tax documents a few times before handing them off to Don. Anyway, he received the rest of my stuff on Monday and the electronic filing should be happening momentarily.
The fun thing about Don is that he actually does our taxes while we’re sitting there in real time. So at the end of the three hours, he presses the button, utters his “ta-dah” and the result usually prompts a group hug. We like our accountant. To be honest, I think we’re his first and only lesbian clients and he finds the lifestyle to be mildly titillating. He’s an accountant for god’s sake. I would find our lifestyle titillating.
Okay, so where am I going with all this? Today is about tax refunds. All the financial experts agree that if you’re getting a refund then you’ve given your money to George and the boys interest-free for a year. Scott Reeves at Forbes writes, “Some people intentionally over-withhold on the theory that it’s an enforced savings plan. Bad idea. Check the interest rate on the extra amount withheld by the government for a year – it’s zero, zilch and nada. That’s like stuffing a fistful of dollars under the mattress for a year, but without the romance, metaphorical or otherwise.”
“If you have difficulty saving, consider an automatic deposit of your paycheck into both your savings and checking accounts. The interest on a passbook savings account will be low, but it will be 100% more than what the government pays on the amount over-withheld.”
This is where I disagree with the experts and sure to receive a few comments today saying that I’m wrong… which I never mind hearing. The point of Sitting Pretty is to talk about what works for me. Jeanine and I both like getting a refund. Here is the reason why: most people lack the discipline to save. Of course, I save using an automatic deposit plan. But I consider my tax refund a windfall and for some reason when it comes in a lump sum, it seems so much more satisfying and usable. What’s the trade-off? A hundred bucks in lost interest. Big deal.
The government only gets it for a year and then it’s mine and it’s substantial and it gets invested at this time. The problem is that many people also lack the discipline to handle windfalls. Military.com gives our service members a few basic tips here. The Financial Planning Association has loftier suggestions to make this money work for you in 8 Ways To Spend Your Tax Refund.
No matter which approach you take… save now or save one year later. Just save.
On Friday, Jeanine and I spent three hours with Don, our CPA. If this exercise had taken place back in kindergarten she would have received the gold star at the end of the assignment for organization. Of course, I was missing several required supporting documents and had to locate them over the weekend all because I didn’t fill out my paperwork ahead of time.
One of the pet names given to me by Jeanine is “shortcuts”. According to her, the reason I’m so productive in life is because I cut corners. She makes a solid case by pointing to my reading technique and claiming that it’s more about skimming than reading. Perhaps, this is why I “read” 3 books to every 1 of hers and also squeeze in a stack of magazines including the weekly New Yorker (which requires some superficial reading or you’d never keep up).
Maybe I do take shortcuts but I also live by the touch it once method. The problem though is that I probably should have touched my tax documents a few times before handing them off to Don. Anyway, he received the rest of my stuff on Monday and the electronic filing should be happening momentarily.
The fun thing about Don is that he actually does our taxes while we’re sitting there in real time. So at the end of the three hours, he presses the button, utters his “ta-dah” and the result usually prompts a group hug. We like our accountant. To be honest, I think we’re his first and only lesbian clients and he finds the lifestyle to be mildly titillating. He’s an accountant for god’s sake. I would find our lifestyle titillating.
Okay, so where am I going with all this? Today is about tax refunds. All the financial experts agree that if you’re getting a refund then you’ve given your money to George and the boys interest-free for a year. Scott Reeves at Forbes writes, “Some people intentionally over-withhold on the theory that it’s an enforced savings plan. Bad idea. Check the interest rate on the extra amount withheld by the government for a year – it’s zero, zilch and nada. That’s like stuffing a fistful of dollars under the mattress for a year, but without the romance, metaphorical or otherwise.”
“If you have difficulty saving, consider an automatic deposit of your paycheck into both your savings and checking accounts. The interest on a passbook savings account will be low, but it will be 100% more than what the government pays on the amount over-withheld.”
This is where I disagree with the experts and sure to receive a few comments today saying that I’m wrong… which I never mind hearing. The point of Sitting Pretty is to talk about what works for me. Jeanine and I both like getting a refund. Here is the reason why: most people lack the discipline to save. Of course, I save using an automatic deposit plan. But I consider my tax refund a windfall and for some reason when it comes in a lump sum, it seems so much more satisfying and usable. What’s the trade-off? A hundred bucks in lost interest. Big deal.
The government only gets it for a year and then it’s mine and it’s substantial and it gets invested at this time. The problem is that many people also lack the discipline to handle windfalls. Military.com gives our service members a few basic tips here. The Financial Planning Association has loftier suggestions to make this money work for you in 8 Ways To Spend Your Tax Refund.
No matter which approach you take… save now or save one year later. Just save.
posted by Nina Smith at 6:37 AM
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