Search


Subscribe to AFM


Subscribe to AllFinancialMatters
by Email

All Financial Matters

Promote Your Page Too

The American's Creed

Site Sponsors

Books I Recommend


AFM in the Media


Money Magazine May 2008

Real Simple March 2008

Blogroll (Daily Reads)

« | Main | »

Question of the Day – Tax Refunds

By JLP | January 27, 2011

We’re getting closer to April 15th. Today’s question of the day is about tax refunds:

Will you get a tax refund this year? If so, what do you typically do with the money? Do you save it or treat it like found money?

We haven’t gotten a refund in years. This year we will owe more than usual thanks to entirely losing the child tax credit. My numbers aren’t official but it looks like we’ll owe somewhere around $2,100.

It’s almost mind-numbing when you think about how much you pay in taxes each year. I bet for us, our number is over $50,000 (federal, property, social security, medicare, sales tax, gas taxes, etc.). Makes my head hurt.

Topics: Question of the Day, Taxes | 43 Comments »


43 Responses to “Question of the Day – Tax Refunds”

  1. BG Says:
    January 27th, 2011 at 10:52 am

    How come you are losing the child-tax-credit?

    I think we should get around $500-$1000 back — we are getting the full $1,500 energy credit for replacing the furnace/AC system in our house. I would’ve just repaired the thing and limped along for another year or two if not for the credit.

    We do pay a lot in taxes: the question is, are you getting ‘value’ from it? Gas taxes are the easiest one to see the value you get (roads) — the others get more questionable, especially at the federal level…

  2. Matt Says:
    January 27th, 2011 at 11:19 am

    Yep. Should be in the neighborhood of $1,700 – $1,800. Energy tax credit for new windows, student loan interest deduction, and itemizing for the first time. Gonna build some closets. Also, I would happily fork over more in taxes. HAPPILY. I like my roads paved, prisons staffed, and public schools educating the neighborhood kids.

  3. Lynn Says:
    January 27th, 2011 at 11:20 am

    I am hoping to owe less than $2000…last year we owed over $4000! Whoops! And that was with the $1500 energy credit. We made less money this year but paid a lot more in taxes but due to S-corp earnings will owe money.

    We haven’t qualified for the Child tax credit in a couple of years :( Yeah,its great to earn more, but paying more taxes is not fun too! We pay about 50K in just income taxes and real estate taxes. I try not to think about adding in FICA or sales taxes etc. YUCK!

  4. Stacey Says:
    January 27th, 2011 at 11:40 am

    Ok, since I’ve been baring all lately… our 2010 Federal, (including SE and AMT,) IL, PA, RET, SS, & FICA total a disgusting $70,492.35. Add thousands more for sales tax…
    We haven’t qualified for the child tax credit for years. By the time we can again, they’ll all be out of the nest.

  5. JLP Says:
    January 27th, 2011 at 11:47 am

    Matt,

    How much did it cost to install the windows? I’m curious because I’m thinking about doing that to our house. I haven’t done any sort of pricing yet.

  6. Beeg Says:
    January 27th, 2011 at 11:52 am

    Isn’t ironic that we (Christians) pay God 10%, but fork over 40% in taxes to a sovereign govt?

    Seems backwards.

    Most money the govt absorbs is substantially waisted more than if it was used by the private sector. Name one successful govt program.

    Sigh, maybe after the USA defaults in the next 10 years, we can move pass entitlements.

    Enough soap box for today.

  7. Beeg Says:
    January 27th, 2011 at 11:54 am

    And BG,
    the child credit is phased out for those making over like $160K AGI (for 3 kids). Any AGI over $100K (married/jointly) reduces tax credit by 5%. So, 1 kid, 20$K above $100K AGI threshold = no tax credit, so on and so on.

  8. Lynn Says:
    January 27th, 2011 at 12:07 pm

    JLP- we put in triple pane windows last year to get the tax credit too and it was the best decision we ever made. We had 25 year old wood Andersen windows that leaked and were horrible. We paid almost 11K for 16 windows and 3K for an Andersen sliding glass door. The project started out as double pane windows for our first floor and ended up as triple pane for the entire house and a sliding glass door. I love going up to our windows and not having a clue how cold it is outside (even when it was -9 the other day!) We went with the triple pane because they were not that much more than the double pane.

  9. JLP Says:
    January 27th, 2011 at 12:09 pm

    Beeg wrote:

    “Isn’t ironic that we (Christians) pay God 10%, but fork over 40% in taxes to a sovereign govt?

    Seems backwards.”

    I agree.

    The problem I have with taxes is that we turn this money over to the government so that they can essentially take it and spread it amongst their friends and people who will help them stay elected.

    There seems to be a disconnect between what the people want and what the government does. The health care legislation that was passed was not wanted by upwards of 70% of the American people. Do you think that made a difference? NOPE!

    People can talk until they’re blue in the face but they will NEVER convince me that Social Security is/was a successful program. In my opinion, it was the creation of this program that began our nation’s long descent into bankruptcy.

  10. JLP Says:
    January 27th, 2011 at 12:12 pm

    Lynn,

    Thanks for your response. We live in the fairly deep south (40 miles from the gulf in Southeast Texas). I doubt would would need triple paned windows but double would be nice. Our house was built in ’61 and the windows they used back then were single pane and very thin. They’re also not very attractive.

  11. Money Beagle Says:
    January 27th, 2011 at 12:22 pm

    We will get a refund. Most of it goes to paying down debt or saving for long term goals. We do use about 10% or so to spend on things we need/want now, which is just about the perfect amount.

  12. Jaynee Says:
    January 27th, 2011 at 12:45 pm

    We will get a refund, and usually we dump 50% in savings, give ourselves 10% to play and buy frivolous stuff, and put the other 40% towards debt. However, this year we may be using a portion of it to replace our badly worn carpeting with hardwoods, and whatever remains afterwards goes into savings. That’s still under debate in our house though.

  13. BD Says:
    January 27th, 2011 at 12:47 pm

    I’m one of the top 2% earners and I agree with Matt: “I would happily fork over more in taxes. HAPPILY. I like my roads paved, prisons staffed, and public schools educating the neighborhood kids.”

    I’m tired of Congress grandstanding on my behalf as if I’m some kind of poor little rich girl who doesn’t want to pay her fair share. End the Bush tax cuts! They were nice but unaffordable, and I really do think the US government can do more to create jobs, slow climate change, and create social justice than I can, even if I give generously to charities of my choice.

  14. Lynn Says:
    January 27th, 2011 at 1:03 pm

    BD — no one is preventing you from giving more. If you think you should pay more, than go ahead. As for me, I pay enough.

  15. Matt Says:
    January 27th, 2011 at 1:26 pm

    JLP: All in, about $4,600 for 13 windows. I understand that windows are a fairly easy thing to DIY, but not 13 in one day for a first-timer.

    Beeg: Wow. This might take me a minute NO WAIT: earned income tax credit, social security, Medicaid, Medicare, Americorps, national defense, SO2 cap and trade, FDIC, Pell grants, NASA…oh man. What a dumb statement. What a short-sighted, obtuse remark.

  16. Matt Says:
    January 27th, 2011 at 1:34 pm

    Oh, and JLP: when social security was instituted, it meant that growing old in the United States was no longer synonymous with dying poor for millions of Americans. I’m sure you, like most of the readers of this blog, are probably more fiscally astute than the average American: we’re savers, we prepare for contingencies, and we don’t want to have to rely on a system that may be providing diminishing returns by the time we need to use it. However, that mindset doesn’t make me turn around and look at those Americans who DON’T live by the same mantra and say “boy, I guess you should have started savings some money 40 years ago.” The ant and the grasshopper is a useful allegory, but it’s a pretty heartless way to live.

  17. Courtney Says:
    January 27th, 2011 at 1:54 pm

    Haven’t run the numbers yet, but we will probably owe $600-800 by my best guess. Last year we owed $83 – almost perfect!

  18. mleklund Says:
    January 27th, 2011 at 1:56 pm

    I for one, am still waiting on my tax refund from last year. The IRS has been trying to stiff me on my first time homebuyer tax credit for the last year. They keep asking for a little bit different documentation each time. ( I have responded on 4 occasions to their request. ) I guess that is what I get for not being in prison ( http://www.usatoday.com/money/economy/housing/2010-06-23-home-buyers-credit-inmates_N.htm )

  19. Beeg Says:
    January 27th, 2011 at 2:04 pm

    Matt:
    +earned income tax credit – how is this a success?
    +social security – this a joke right. the first person that ever drew from ss, put in under $30 and took our over $30,000, how is that going to survive? answer it WONT!!!
    +medicaid – really? that’s successful
    +medicate – failure – this will be the straw that breaks the back of America
    +Americorps – ?
    +national defense – private could be better – cheaper. how’s Iraq and Afgan doing? we are adding trillions to the deficit ever year in senseless wars
    +cap & trade – one word ‘climategate’, climate change is a farse, get your head out of the clouds man
    +pell grants – ?
    +NASA – what have we benefit from NASA? being the first to the moon? how has that helped us here on earth

    I see you failed to mention FEMA (think Katrina) and TSA (think the last time you went to an airport).

    You are the one that is ignorant, keeping drinking the kool aid man!

  20. Matt Says:
    January 27th, 2011 at 2:19 pm

    Beeg: I don’t know if you’re going to “get” this, because by misspelling farce (which is funny enough, incidentally) and by invoking “climategate” tells me that you’re just not there. I doubt you’ve actually read anything ABOUT the East Anglia thing. I can cite economic theory about work incentives (EITC); I can talk about moral agency and public goods (national defense); I can cite market factors and note that acidic precipitation isn’t harming crop yields like it used to (SO2 markets)…but what’s the point. You just don’t know what you’re talking about. You want to parrot talking points that you hear on TV and the radio, but I doubt you’ve ever actually looked into their accuracy. This would be an adult explaining the world to a child.

    And just as I’m not some cook who says “look it’s snowing OMG GLOBAL WARMING IS A MYTH,” I’m also not going to denigrate an entire program based on its most popular negative anecdote. Ask people on the West Coast how much they appreciate FEMA when wild fires tear through their neighborhoods. As much as TSA may be an inconvenience, I’d much rather survive my plane flight.

  21. BG Says:
    January 27th, 2011 at 2:40 pm

    “The problem I have with taxes is that we turn this money over to the government so that they can essentially take it and spread it amongst their friends and people who will help them stay elected.”

    The majority of the money is going out paychecks to federal employees — simple as that. The federal government is the #1 employer in the United States — far more than Wal-mart employs WORLD-WIDE.

    You want to know where the money is going: that’s where.

  22. JLP Says:
    January 27th, 2011 at 2:45 pm

    Matt,

    I understand the purpose of social security. What I don’t like is how the program was expanded over the years and has become the behemoth that it’s become. That’s what happens when politicians make promises with other people’s money.

    If they wanted something to be a safety net, then fine. Make it a safety net. Take less of my money and put it in a general fund and make payments means tested. The government has no business taking my money and then essentially giving it back to me at a later date. Not only that, the really insulting thing is that the government TAKES my money and charges federal income tax on it too! Contributions to Social Security should not be part of taxable income. And, if I’ve been smart with my money and saved for retirement, the government will tax my social security payments because I’ve saved too much and am considered “rich.”

  23. Matt Says:
    January 27th, 2011 at 3:05 pm

    Beeg: So wrong it’s scary that someone actually believes this. This is absolutely no different than me saying “hey buddy, the sky is brown and the moon is made of MEMORY FOAM.” The majority of federal expenditures go to debt service, defense spending, and subsidy. There is no conspiracy here, this is a basic fact. The Budget of the United States is not some secret, mystic tome. It’s there for you to read, if you so choose.

    JLP: Fair enough on the social security tax issue. And no question that it’s a program needing modification. We all live longer, and there’s less of us to support retirees (my generation is working on that, though). But my fundamental assertion stands: it may not be perfect, but it is so much closer to perfection than the alternative. I mean, look: not everyone is financial savvy; are you truly willing (even as a professed CHRISTIAN) to look at them and say “so sorry, too bad. I wanted my taxes to be lower.” What’s your alternative? Means testing is not the egg it’s cracked up to be.

  24. Matt Says:
    January 27th, 2011 at 3:07 pm

    Sorry, I guess that was BG (not Beeg) making the wildly-inaccurate statement about federal spending.

  25. Lynn Says:
    January 27th, 2011 at 3:14 pm

    A perfect example of the problem with social security: my 97 year old grandfather collects more that 3000/month in benefits. He retired at 72. So He has collected 36,000 +/- per year for the last 25 years. That is an insane amount of money. The system did not take into account the longevity of people living. I don’t think my grandfather ever made more than 40K a year… totally crazy!

  26. BG Says:
    January 27th, 2011 at 3:22 pm

    Matt) I think you meant your comment to me, BG, not Beeg — not the same guy.

    I have read the budget summaries. Take defense spending as an example: who do you think gets that money? We don’t shoot it to the moon on a rocket.

    We employ people to work as soldiers, build fighters and subs, etc. The money, in the end, goes back to people as compensation.

    Same for the vast majority of other government spending — it is payment to someone for labor/products/services.

    When people say the government needs to “quit spending” — I take that literally as that a mass-layoff needs to be done. I don’t disagree either. I think federal employees are compensated much higher than (private) market averages, especially in regards to pensions, healthcare, and all the other perks they get on top of their high incomes.

    How many state/local/federal employees do we need to have before we are considered ‘communists’? <– this is a dead-serious question I have.

    Today, there is a government employee for every 13 people in the US. Did we become 'communist' when we had a government employee for every 15 people? Will we be 'communist' when we have a government employee for every 10 people in the US?

    Where does the madness end.

  27. Matt Says:
    January 27th, 2011 at 3:35 pm

    I dunno, BG, I think you’ve got a pretty good handle on the madness yourself. To throw around the word “communism” in such knee-jerk fashion and do it in complete sincerity…wow.

    So: are Boeing engineers a bunch of communists, or do you consider them “federal” employees, if they are paid as a defense contractor to build the F-35? What about the Halliburton employees that staff the kitchens at military bases? And those pinko day care centers that operate Head Start?

    Look. An uninformed group of Tea Partiers can get together with irrational libertarians and talk all day about how utopian it would be if we could just rid ourselves of this sinister, evil government. But then you have to tell states like Mississippi, Louisiana, and Florida that we’re taking away the money they used to get from states with higher GDPs. Michigan collapses inward on itself like a dying star. And what you end up with is 50 little entities, some of them shiny and special and fiscally sound (aka South Dakota) and some of them so poor and destitute that you think they just stepped out of the mid-19th century. What a brave new world.

  28. Matt Says:
    January 27th, 2011 at 3:38 pm

    (Re: Lynn) JLP, do any of your commenters understand net present value, inflation, cost of living, etc? Is there any fundamental economic knowledge here?

  29. BG Says:
    January 27th, 2011 at 3:39 pm

    Matt) You didn’t answer my question: How many state/local/federal employees do we need to have before we are considered ‘communists’?

    BTW, I voted Democratic the last two elections.

  30. BG Says:
    January 27th, 2011 at 3:43 pm

    Matt) maybe ‘communist’ is not the correct work, perhaps the word ‘socialist’ is.

    Whatever the correct term is: having a government employee for every 13 people is ridiculous.

    If the word ‘communist’ is not appropriate, then what is the correct word when practically everyone is a government employee?

  31. Bill Says:
    January 27th, 2011 at 7:35 pm

    52 percent of all Americans do not pay any income tax. Absurd. I think there should be a federal committee where people can give the federal government ideas on how NOT TO WASTE OUR TAX DOLLARS. And then every dollar saved by the government that person will receive 50 cents on the dollar.

    For example how much money is wasted on the flyovers you see at every sporting event. Just think of the manpower, gas, equipment that is wasted on these flyovers. They last only a couple of seconds whereas they could easily tape it once and replay on the big screen which probably would be better anyway.

    Now let’s say we save the federal tax-payers $50,000 (this is just a guess)I would be reimbursed $25,000.

    I would like to hear other peoples specific ideas on how we can save our hard earned tax dollars from going to waste.

    I strongly believe the federal government brings in more than enough money not to have a deficit. The problem is the waste that occurs.

  32. John Says:
    January 27th, 2011 at 10:27 pm

    JLP

    If the Social Security was put into a “trust fund” and not stolen by both Democrats and Republicans to balance the budget, we would not be having this conversation today. The tax cuts started by Reagan in the 80’s are what put this country on the road to banruptcy, which was their intention, so they could eliminate social programs for the poor and middle class and protect the wealth of the top 1%.

  33. krantcents Says:
    January 27th, 2011 at 10:45 pm

    I am not sure how much of a refund we will get, but it and the social security tax reduction will go to fund our IRAs for 2011. I a pretty good at making sure we do not pay much or receive a large refund.

  34. tom Says:
    January 28th, 2011 at 8:30 am

    Yikes… looks like my calculations were way off this year. I’ll be owing a couple grand. Usually I try to get as close to 0 as possible, but this year was a bit weird with my wife’s new job and some pay adjustments on my part. We’ll have to plan a little better next year.

  35. Jon Says:
    January 28th, 2011 at 11:25 am

    We made probably $2,000 dollars last year and we have two kids so we should probably get a tax “return” this year, it will make up for all those taxes we paid in other years.

    We put it in the bank and save it. We’re not spenders.

  36. Russ Says:
    January 28th, 2011 at 11:56 am

    We usually get a grand or so back. Just really depends. I don’t know what is worse, people who think a tax refund is a bonus or the fact that most people really have no idea how much they pay in taxes each year.

    If everyone had to just write a check once or twice a year for the taxes they owe versus having it drafted out of their paycheck, the general populace would have a much different view as to how their tax dollars are spent.

    I have no problem paying taxes to support my community, etc but when when you are literally giving up almost 40-50% of every dollar in taxes between Fed, State, County, Sales taxes, gas taxes, etc that is just straight getting pimped.

    Unfortunately, the Sheeple have figured out they can vote themselves a portion of my earnings.

  37. BG Says:
    January 28th, 2011 at 1:07 pm

    “I have no problem paying taxes to support my community, etc but when when you are literally giving up almost 40-50% of every dollar in taxes between Fed, State, County, Sales taxes, gas taxes, etc that is just straight getting pimped.”

    And those are near the same tax rates in countries that have universal health-care (which is every industrial nation on the planet, excluding the US).

    We are just not as ‘efficient’ with our tax dollars as other industrialized nations. We blow tons of tax money keeping prisons full of non-violent criminals (as an easy example).

  38. Russ Says:
    January 28th, 2011 at 2:07 pm

    I don’t support universal healthcare and I certainly don’t think I should be giving up half my earnings to support a bloated government. Like I said, we need taxes to support our infrastructure, military, etc but government has become far too reaching.

    The private sector is far more efficient when it comes to doling out money for charities etc than the government ever will be.

    If something is a worthy cause, I’m sure charities can raise money for it without the government confiscating my money.

  39. BG Says:
    January 28th, 2011 at 5:54 pm

    Russ) You and I don’t disagree. Personally, I don’t give a crap how much is taxed, and what services we get for that.

    What I care about: is WASTE! If you are going to tax me, then at least don’t waste the money, especially when compared to so-called ‘socialist’ countries like Germany that are taxed roughly the same and get much more ‘services’ from their government.

    I was just using the Universal Healthcare as an example of other services that governments are giving their citizens for roughly the same amount of taxes we pay.

  40. Beeg Says:
    January 28th, 2011 at 11:05 pm

    Matt,
    Typical liberal…instead of responding to the challenge you answer with jokes. It is called deflection. To compare yourself as an adult and me as the child is extremely arrogant.

    I have a technical background. I have completed 24 hrs of math (including 15 hrs of calculus and adv math). Also, add in a little chemistry (inorganic, organic, hazard waste management, etc), with some other technical courses. Oh, and I graduated in 4 yrs with honors.

    So, “daddy”, maybe you can teach your “little one” something and explain one of them in more details. Maybe stay away from the diggs and actually focus on the facts.

    I am an engineer, and I like the phrase “In God we trust, all others bring data”.

  41. anna Says:
    January 29th, 2011 at 3:18 am

    I should get about 800$/back this year. Between being a PhD student for the first half of the year and being partially-employed for the latter half, I made not very much money at all.

    I’ll probably do with it what I do with most of my money – 30% to savings (long + short term), 20% to deal with a minor amount of remaining debt, 50% to live my life.

    Seems reasonable to me!

  42. Yana Says:
    February 1st, 2011 at 8:16 pm

    I do my best to see that we don’t lend the government money, but failed last year because of unexpected credits – so we got a refund last year. This year we owe around $300. Very good, as it is usually more.

  43. Angelo Says:
    February 3rd, 2011 at 2:03 pm

    Not sure what the difference between saving and found money is… I’ll treat it like all my money, put it in the bank until which time I move it to an investment account. I don’t really track which dollar is from a particular source.

    By the way, the taxes we all pay are indeed high. I guess the question is are we getting what we pay for?

Comments