What are you buying with your tax return(2010 edition)

[stevew]

Up until the recent cow incident, I was planning on spending a large portion of my Obama bucks on some household upgrades. Now, I'm unsure.

A couple questions
1. With the crazy amount of tax credits out there, how is the gubment going to be able to print enough money in order to handle refunds without a significant delay.

2. How are places like H&R block able to run their massive refund interest scam. Seems like the tax payers could save a ton here by offering a cheaper product. I know there are dumb people who have to have their money rightnow. My neighbor works for a different place and was saying he was shocked at the amount of fees they collect

[Lathum]

I always do our taxes myself.

We are going to put a chunk towards student loans then save the rest for a cushion so my wife can take extra time off when the baby comes in April.

[RainMaker]

Unless you are doing really complext stuff, most people should be able to use one of the online sites. Used to use TaxActOnline.com for years with great success.

[lighthousekeeper]

[quote=stevew;2209829]With the crazy amount of tax credits out there/QUOTE]

What tax credits - I just fill out my tax return and didn't see any.

[Schmidty]

I'm basically breaking even. I don't like loaning the government my money without interest.

[stevew]

Windows. New home. Education. Car. There are several more. But you might not qualify for any of them.

[Peregrine]

I try to set mine so that I don't get a huge refund - probably just put whatever I get in savings.

[MizzouRah]

Time to pay off credit cards!

[tarcone]

Going to Florida this summer. Touring the state. From Ocala to St Petersburg to Sunrise to Key West to Sea World and stops in between im sure.

[DanGarion]

Originally Posted by stevew

Windows. New home. Education. Car. There are several more. But you might not qualify for any of them.

We get to take advantage of the 1st one, we already did the house credit last year, but now we also get to declare all the property taxes and interest!

[panerd]

You guys do realize that this was your money that you have earned throughout the year and not some giant prize you just received? Why not change your withholdings so that you don't have to wait a year to be paid a thousand or two but instead are paid it throughout the year? ($20-$25 a check that could go towards something useful instead of something unnecessary))

[Lathum]

Originally Posted by panerd

You guys do realize that this was your money that you have earned throughout the year and not some giant prize you just received? Why not change your withholdings so that you don't have to wait a year to be paid a thousand or two but instead are paid it throughout the year? ($20-$25 a check that could go towards something useful instead of something unnecessary))

Me personally I would rather get a large sum of money at one time than a little every week. Also, we get a lot more than a thousand or two, and I don't think paying off student loans and putting money aside so my wife can stay home with the baby is unnecessary.

[DaddyTorgo]

Originally Posted by Lathum

Me personally I would rather get a large sum of money at one time than a little every week. Also, we get a lot more than a thousand or two, and I don't think paying off student loans and putting money aside so my wife can stay home with the baby is unnecessary.

i'd have some humorous comment about how the last part might be unnecessary but i'm afraid your wife, aided by the pregnancy hormones might fly into a rage and blow me up with her mind all the way from Seattle or something

[Lathum]

I agree it's not a necessity, but we do well, so if we use that money to offset unpaid time off so be it. I just think it is a little smug for someone to determine someone elses necessities.

[RainMaker]

I splurged a little early and called it a tax return/Christmas gift. Needed a new couch and recliner really bad in the living room.

[M GO BLUE!!!]

Originally Posted by stevew

Up until the recent cow incident, I was planning on spending a large portion of my Obama bucks on some household upgrades. Now, I'm unsure.

[Fidatelo]

We'll just add ours to our savings account. At some point next year that money will funnel down and become some kind of home improvement like new windows or a water heater, but I won't be able to tell you which products actually received money directly from the tax return. I suppose I could probably keep all my statements of deposits and withdrawals from the account throughout the year and then do the math to figure out at what point that tax money started outflowing, but that seems like a lot more work than I'm willing to go through to more accurately respond to this question.

[Dutch]

Pay off half of my credit card which accumulated with a couple of devastating car repair bills as of late.

[lungs]

I'm going on a bender.

[gstelmack]

Originally Posted by panerd

You guys do realize that this was your money that you have earned throughout the year and not some giant prize you just received? Why not change your withholdings so that you don't have to wait a year to be paid a thousand or two but instead are paid it throughout the year? ($20-$25 a check that could go towards something useful instead of something unnecessary))

You do realise that it is next to impossible to know ahead of time how congress is going to screw around with tax bills, tax credits, or even what they are going to actually withhold from your check? Thanks to a work bonus one year I went from getting $1500 back to owing $1500. State taxes also complicate this, as I often have years where I'm getting a federal refund but owe state, and the next year it's flipped. And I've tried various W-4 calculators and rarely get consistent results.

As long as I can stay close, within that one to two thousand you mentioned, I'm happy. And I'd rather be erring on the side of getting a bit back than suddenly finding I owe an extra $1500 I didn't expect.

[Flasch186]

Originally Posted by panerd

You guys do realize that this was your money that you have earned throughout the year and not some giant prize you just received? Why not change your withholdings so that you don't have to wait a year to be paid a thousand or two but instead are paid it throughout the year? ($20-$25 a check that could go towards something useful instead of something unnecessary))

because my frcikin company made tracking down an HR rep to get the document fulfilled is like finding a Where's Waldo except they get to hide anywhere in the country!

[Philliesfan980]

As an Accountant, and just someone who's generally interested in personal spending habits, I love threads like these.

A few points -

1. First off, as far as doing your own taxes as opposed to taking them to a professional (and I'm using that term loosely when speaking about H&R Block), some people are just generally terrified of taxes and financial things in general. The vast majority of people on this board are very intelligent, but the general public really isn't with these types of things. Much like how it's really easy to change your own oil and filters in a car, it's really easy these days to do taxes yourself if you're comfortable with modern technology. When I was in Public Accounting, the majority of returns that I did were fairly standard, but most were of relatively high net worth individuals (combined AGI of greater than 500K). Some people just like to be able to throw all their statements/W2's in a envelope that we would provide, sit back, and get their return 2-3 weeks later, and pay $300-500 for that service. It's also funny to see how little these people give to charity, but that's another topic all together....

2. If this was a thread in a previous year (well, probably more like 2-3 years ago), we would have seen a lot more personal spending with this refund (ie. TV's, video games, trips, etc), but more people are paying down debt, which is great for the personal consumer, but bad for the overall economy that we've built for ourselves. Someone who is a lot more versed in the stock market than me will probably be able to comment if tax return refund spending is already priced into certain stocks, and when that spending never occurs, how much will the stock market as a whole tumble?

3. Like another poster said above, it is pretty tough to determine your tax liability in this climate, especially if you have a lot of variable income (commissions, bonuses, etc). I like to be cautious and always end up getting back around $500-$1,500. Interest rates suck these days anyway, so I don't feel like I'm taking much of a risk to have the govt hold the money for me (about $30 figuring 2% annual interest).

4. I'll use my modest refund to help pay for some graduate classes my fiancee is taking. Of course, being an accountant, I get more pleasure than a non-accountant does at paying bills. It's sad actually.

[MacroGuru]

It's going to be interesting for me this year. I normally run exempt for half the year and then maximize deductions for the other half to keep it a fair balance but due to the rough climate of sales, I went exempt all year. However, I do not have a secondary source of income coming in like I have had in the past and with the business taking it's hits I might be able to break even and not write a check, we will see.

[Suburban Rhythm]

Originally Posted by Philliesfan980

As an Accountant, and just someone who's generally interested in personal spending habits, I love threads like these.

A few points -

1. First off, as far as doing your own taxes as opposed to taking them to a professional (and I'm using that term loosely when speaking about H&R Block), some people are just generally terrified of taxes and financial things in general. The vast majority of people on this board are very intelligent, but the general public really isn't with these types of things. Much like how it's really easy to change your own oil and filters in a car, it's really easy these days to do taxes yourself if you're comfortable with modern technology. When I was in Public Accounting, the majority of returns that I did were fairly standard, but most were of relatively high net worth individuals (combined AGI of greater than 500K). Some people just like to be able to throw all their statements/W2's in a envelope that we would provide, sit back, and get their return 2-3 weeks later, and pay $300-500 for that service. It's also funny to see how little these people give to charity, but that's another topic all together....

2. If this was a thread in a previous year (well, probably more like 2-3 years ago), we would have seen a lot more personal spending with this refund (ie. TV's, video games, trips, etc), but more people are paying down debt, which is great for the personal consumer, but bad for the overall economy that we've built for ourselves. Someone who is a lot more versed in the stock market than me will probably be able to comment if tax return refund spending is already priced into certain stocks, and when that spending never occurs, how much will the stock market as a whole tumble?

3. Like another poster said above, it is pretty tough to determine your tax liability in this climate, especially if you have a lot of variable income (commissions, bonuses, etc). I like to be cautious and always end up getting back around $500-$1,500. Interest rates suck these days anyway, so I don't feel like I'm taking much of a risk to have the govt hold the money for me (about $30 figuring 2% annual interest).

4. I'll use my modest refund to help pay for some graduate classes my fiancee is taking. Of course, being an accountant, I get more pleasure than a non-accountant does at paying bills. It's sad actually.

Want to touch on points 1 and 3

1) I'm in a financial field, and I do my own taxes, as well as a handful of aunts, uncles, cousins, friends etc who don't want to be bothered. Usually ends up we meet up for dinner, they grab the bill, we head to our place with a big envelope full of forms, and they get to hang out with the kids if they haven't seen them in awhile and I file their stuff online.

Many people are just terrified of "messing up" and having someone else file for them provides them some peace of mind.

3) Many people aren't disciplined enough to set aside the $50 from each check they might be able to save...I'll put myself in that category! That $50 is just rolled into whatever number is already hitting your account direct deposit every 2 weeks. Paying a $30 "fee" to have it saved for you and get a $2,000 check at the end of the year isn't such a bad thing. People pay $30 a month on finance charges on credit cards without blinking an eye. Unless your refund is in the tens of thousands range (in which case I imagine your AGI is at such a level that you are paying a professional, not H&R Block, to handle your taxes, and you should be firing them for letting it get to that level), it's not that outrageous.

[Suburban Rhythm]

Dola

We are looking at Disney this year. Our daughter will be in K this fall, so this is the last year we can get away with a early summer (late May) vacation while she's not in school, and hope to take advantage of the mild weather and (hopefully) smaller crowds.

[gstelmack]

Originally Posted by Philliesfan980

Interest rates suck these days anyway, so I don't feel like I'm taking much of a risk to have the govt hold the money for me (about $30 figuring 2% annual interest).

If you're lucky enough to even get 2%, which usually requires a decent-sized savings account ($25K+). Back when passbook savings paid 3+% interest, yes it was a big deal, but right now unless you've got a good-sized stash already, the interest on what the government is keeping is pretty minimal.

[Philliesfan980]

Originally Posted by gstelmack

If you're lucky enough to even get 2%, which usually requires a decent-sized savings account ($25K+). Back when passbook savings paid 3+% interest, yes it was a big deal, but right now unless you've got a good-sized stash already, the interest on what the government is keeping is pretty minimal.

Yeah, you're right 2% is really good these days. I forget how long ago it was, but I long for the days when ING direct was giving me about 5 - 5.5% (forget the exact figure) on my savings account. Probably around 2003 or so.

Also, if you want to look at it in a different light, we're helping the government earn a little interest on their reserves for holding our money for us .

But in any event, I'm really glad that the general feeling in this country (not focusing on this board or anything, just from my travels) is slowly changing from uncontrolled spending to more saving. I realize that there might be some more tough times down the road because of this slowdown in spending, but in the long run, it will be the best for nearly everyone.

[Marc Vaughan]

My wife was telling me that Wachovia have a saving account which apparently guarentee's a 5% return for 2 years - I'm going to look into it at some point next week to see if its as good as she was told or not ..

[DanGarion]

If you are really smart you just don't pay taxes all year, save all the tax money and then pay it at the end... Not that I do that, but really that's the best way to save money.

[Philliesfan980]

Originally Posted by DanGarion

If you are really smart you just don't pay taxes all year, save all the tax money and then pay it at the end... Not that I do that, but really that's the best way to save money.

The government won't let you do that. I guess theoretically, if you can beat the underpayment penalty in the market, go for it, but it's risky.

[terpkristin]

I expect, because I was too lazy to muck around with my taxes after buying a house (I bought in Sept 08), that I'll be getting some money back from the government. I'm hoping to take a trip to Alaska later this year, so I think I'll put any refund aside for that. I suppose the smarter thing to do is to put it aside and save/invest (I don't have any debt to pay down other than the house), but I know that in 2011 I probably won't get much time for vacation, so I'd like to take one this year. We'll see.

/tk

[Scoobz0202]

Probably nothing big, but I am thinking about getting a Kindle or a Nook. I've always wanted one but part of me still loves adding to my physical book collection.... Something about the smell of a new book. Call me weird...

[EagleFan]

1st: New bed for my youngest
2nd: Vacation fund
Remaining: Savings

[lighthousekeeper]

Originally Posted by Scoobz0202

Probably nothing big, but I am thinking about getting a Kindle or a Nook. I've always wanted one but part of me still loves adding to my physical book collection.... Something about the smell of a new book. Call me weird...

kindle needs a mod that allows its owner to project his/her library onto a family room bookself for impressing guests.

[Alan T]

How are most of you able to do taxes so soon? My wife is on my case that I haven't done ours yet as well. I am blocked by several different fronts that I don't even have all of the forms from etrade or my mortgage bank yet. When I call, I can't even get them until after Feb 15th.

Is it a case most of you don't have mortgages or do stocks, or am I just unlucky to have the wrong companies for such things?

[claphamsa]

turbo tax does it all... fuckign BOA hasnt sent me my mortgage shit yet... but ill be getting money.... I wont spend it tho.

[Logan]

I got my W2 on Friday and filed with TurboTax today in about 15 minutes. I rent so no big stuff with mortgage interest, I already had my online savings 1099, I don't qualify for deducting student loan interest anymore, and Scottrade had my statement available for the one stock I sold this year (and about 5 of those minutes were for clearing up issues related to that, as I had to input my cost basis because for some reason that isn't auto-populated, and they were trying to give me short term taxes on the full amount of sale).

Just saving it this year, bought my Macbook with part of it last year.

[dervack]

I had my work w-2 on Jan 4th. Waiting for 1099 from ING and stock sales, otherwise I would have had my money already. Finished my sister's already, she'll be getting her refund this week.

[stevew]

I still need a few more forms. Hopefully they come soon.

[gstelmack]

Waiting for 2 or 3 more bits of info, then ready to roll.

[HeavyReign]

I'll be sending the IRS a check. Last year was around 3k. I expect something similar this year.

[Philliesfan980]

Originally Posted by Alan T

How are most of you able to do taxes so soon? My wife is on my case that I haven't done ours yet as well. I am blocked by several different fronts that I don't even have all of the forms from etrade or my mortgage bank yet. When I call, I can't even get them until after Feb 15th.

Is it a case most of you don't have mortgages or do stocks, or am I just unlucky to have the wrong companies for such things?

I'm currently renting, and because I have a great 401K plan at work (extremely low fees), I pump all my money in a balanced fund there as opposed to spreading it between various accounts. So even though I know how to do complex returns, my own return is very simple.

[Autumn]

I have no idea if I'll be getting any return this year. Our income has changed greatly, and with the changes in the credits and such I won't know 'til I actually finish them. Here's hoping.

[Samdari]

Looks like we'll get a small federal refund and owe a smaller state shortfall.

So, we're buying a month's heating bill in this frozen wasteland.

[Mustang]

No idea what the net effect of the business will be on the tax return this year. I'm just hoping I don't owe any money.

[MacroGuru]

Originally Posted by Mustang

No idea what the net effect of the business will be on the tax return this year. I'm just hoping I don't owe any money.

I am here with you...the shoe site did well this year even though my income went down drastically.....fingers crossed I don't owe anything.

[Vince, Pt. II]

I'm currently looking into laptops. I've never owned one, so I have a lot of learning to do. Since I'm planning on going back to school in the next few years (law school or to finish my undergrad Computer Science degree, I haven't decided yet), I would like to have a laptop to take notes on.

Any suggestions or caveats when it comes to laptops? I really will only be using it for MS Office, music, surfing the web and possibly World of Warcraft, so I don't need anything crazy, though budget isn't really a concern.

[spleen1015]

You know, this is the first year I am starting to hate taxes. Granted, I don't know a lot about taxes, so I could be completely ignorant here.

I know that on my taxes I've claimed myself, my wife, and the 2 kids. I figure it is safe to do it this way so that I don't OWE anything. I'm not worried about giving the government a loan. I just want to make sure I don't have to pay anything.

My wife does the taxes every year with Turbo Tax. We've had years where we've all had to go to the doctor so much that the credits work out that we end up with a big return. One year, we got over $9000 back.

The last couple of years haven't been quite like that, something in the $500 range. Cool beans.

This year, it looks like we owe and we owe close to $2000. How does this shit happen? I am claiming every one that I should.

[SportsDino]

Back when I was trying to push my way out of debt, changing the withholding and putting an extra $X per check towards debt is pretty much like earning your debt's APR as an investment.

So if you have debt and the spare brainpower for it (sometimes it really is not worth worrying about if you can't plan for paying next April), you can think of changing your take home like this:

- Say you get $50 per month from changing withholdings to 0.
- Since the government isn't charging interest, that means you will owe $600, lets say on April 1st.
- Perhaps you have a credit card with a rate at 10% and a balance in the thousands (for simplicity)


The cash flows you would get from applying the extra withholdings against credit card from Jan 1st 2010 to April 1st 2011 as opposed to letting that credit card balance stay:

Effective monthly rate: 0.7974% (for 10% APR)
- Jan 1st: $50 compounded for 14 months: $55.88
- Feb 1st: " 13 months: $55.44
- Mar 1st: " 12 months: $55
- Apr 1st: " 11 months: $54.56
- May 1st: " 10 months: $54.13
- Jun 1st: " 9 months: $53.70
- Jul 1st: " 8 months: $53.28
- Aug 1st: " 7 months: $52.86
- Sep 1st: " 6 months: $52.44
- Oct 1st: " 5 months: $52.03
- Nov 1st: " 4 months: $51.61
- Dec 1st: " 3 months: $51.21

Total interest earned by April 1st 2011: $42.14

So that is money you basically generated out of thin air. But there are other side effects:
Total decrease of your credit card debt: $642.14

Assuming you can swing the $600 you owe the Feds (note this will probably be vastly covered by your other deductions anyway and the government will still owe you money....) if you do absolutely nothing, in another year April 1st 2012 your overall reduction in effective credit bill is $706.35.

All of this stuff piles up and I would highly suggest investing in debt reduction because it gives you real-time returns that have a tendency to free up other money down the road. For small change saving it will beat any saving account out there. If you are running 0 high interest debt like you should be you can apply similar theory towards most car loans and mortgages (most should allow paying back early).

Go further, instead of buying some consumer sheep big purchase with your return, put a dent in your highest interest problem. Put windfalls toward debt and do your consumption on a planned budget and you will find a lot of money in the cracks. You will buy at a smarter time (for instance buying a TV during a sale, instead of a mid-April price hike... hint hint), you will have fewer outstanding bills after a while (so less money in your check going out the door before you can spend it), and ultimately you can buy more (save $300 in debt savings, go for the $1500 TV instead of the $1200... you earned it after all just through pre-planning your purchase).

[DaddyTorgo]

Originally Posted by Vince, Pt. II

I'm currently looking into laptops. I've never owned one, so I have a lot of learning to do. Since I'm planning on going back to school in the next few years (law school or to finish my undergrad Computer Science degree, I haven't decided yet), I would like to have a laptop to take notes on.

Any suggestions or caveats when it comes to laptops? I really will only be using it for MS Office, music, surfing the web and possibly World of Warcraft, so I don't need anything crazy, though budget isn't really a concern.

i think if you cut out WoW you could go with a super-cheap and super-portable netbook there.

not sure a netbook could handle WoW though