Paying The Freakin' Man: The 2007 Tax Return

[Soulstation1]

i gonna get them done today or tomorrow....

[sidewinder]

No refunds for a Mosaic set or two?

[Soulstation1]

the man got me for $200.....

[connoisseur series500]

the man got me for $200.....

That "man" was GW Bush! Bet you paid more during the Clinton years.

(Inside joke between me and SS1) No politics here....

[Soulstation1]

is everyone done with their taxes?

[Chuck Nessa]

Mailed off about $4500 to the feds and state yesterday. Now I'm entitled to bitch. Not a bad deal.

Edited April 16, 2007 by Chuck Nessa

[Uncle Skid]

Also just put about 5k in the mail, including the first installment of 2007 estimated taxes. I hate like heck to write those big checks, but it's better than letting Uncle Sam use my money all year.

[GregK]

I maxed out my deductions, so I got $4800 back in March. I have a tax question: what kind of a return should I expect on mortgage interest payments?

[ejp626]

I maxed out my deductions, so I got $4800 back in March. I have a tax question: what kind of a return should I expect on mortgage interest payments?

Depends on how much house you got.

[GregK]

I maxed out my deductions, so I got $4800 back in March. I have a tax question: what kind of a return should I expect on mortgage interest payments?

Depends on how much house you got.

We're in the process of buying a new construction house, valued at about $226K. Tax should be somewhere around $3400

[Soulstation1]

15 years of mortgage payments and i've never been able to use the interest on my taxes

[kh1958]

No refunds for a Mosaic set or two?

In a just world, there would be a Jazz CD tax credit...

[Harold_Z]

I maxed out my deductions, so I got $4800 back in March. I have a tax question: what kind of a return should I expect on mortgage interest payments?

You deduct what you pay in mortgage interest from your income via Schedule A, so you save what you would have paid in taxes on the amount you deduct. So whatever bracket you are in, say an 18% bracket, you pay $180 dollars less in taxes on every thousand you deduct in mortgage interest.

[J Larsen]

I got back a few grand, which I viewed as a stupid personal mistake. I lent the gov a chunk of my money at 0% - stupid, stupid, stupid. I'll plan better this year.

[Harold_Z]

I got back a few grand, which I viewed as a stupid personal mistake. I lent the gov a chunk of my money at 0% - stupid, stupid, stupid. I'll plan better this year.

Exactly! Better to pay a small amount than get a refund. The ideal is pay a few hundred.

[mikelz777]

I got back a few grand, which I viewed as a stupid personal mistake. I lent the gov a chunk of my money at 0% - stupid, stupid, stupid. I'll plan better this year.

Then again, there are many who treat it as a forced savings plan. Extra money in the paycheck has a tendancy to get spent and a lot of people don't have the discipline to save. That tax refund may be the only reason some have money in a savings account or have that money to get a new car or pay for that vacation. When you think about the pitiful amount of interest you'd earn in a savings account to keep funds liquid and accessable hassle-free, you're not really going to be missing out on much.

[Jim Alfredson]

Getting some money back due to buying that new Hammond digital organ last year (big ol' tax write-off). I keep telling my wife, "See, it's good that I spend money on gear!!!"

[ejp626]

I make about half my income from investments, but don't even know under Dec 31 what the total will be, esp. if the market dips in Dec. So I always owe quite a bit. I haven't been hit with any penalties yet, but it is only a matter of time. I'll go ahead and pay a bit more in estimated taxes for this year.

[Edward]

I got back a few grand, which I viewed as a stupid personal mistake. I lent the gov a chunk of my money at 0% - stupid, stupid, stupid. I'll plan better this year.

Then again, there are many who treat it as a forced savings plan. Extra money in the paycheck has a tendancy to get spent and a lot of people don't have the discipline to save. That tax refund may be the only reason some have money in a savings account or have that money to get a new car or pay for that vacation. When you think about the pitiful amount of interest you'd earn in a savings account to keep funds liquid and accessable hassle-free, you're not really going to be missing out on much.

I completely agree with your assessment that many folks use their tax refunds as a forced savings plan. I always laugh, though, when I hear the same friends, year after year, gleefully talk about how much money they are getting back from the government. JLarsen and Harold Z are right on - if you are getting a significant amount of money back, then you have not managed your finances as well as you could have.

I also agree that, after factoring in federal and state taxes, most people stand to gain little from putting money into savings accounts or interest bearing checking accounts. For instance, if you are paying the top federal and state marginal rates (35% for Federal and 9.3% for California), then 4% interest earned on such investments becomes approximately 2.2% after taxes. Still, it is better than nothing. (BTW, ING Direct presently offers about 4.5% on its savings accounts and 4.0% minimum on its checking accounts. ING still has a promotion in effect whereby you get $25 if you open a savings account with at least $250. If you do open such an account, make sure that you allow a friend who already has an ING account refer you since this person would then get a $10 referral placed in his/her account.)

However, relatively few people should be keeping much of their money in traditional savings/checking accounts. If you are talking about an "Emergency Fund" (i.e., three months' pay), I would keep no more than one month's pay in an interest bearing checking/savings account, and then put the balance into a relatively low-risk, no-load mutual fund with a low expense rate. Such an investment is quite readily accessible via electronic funds transfer. I, for one, keep about two months' pay in Homestead Value (HOVLX) because

(1) the initial investment amount was only $500,

(2) the expense rate is only 0.76%,

(3) the fund has earned an annualized rate of approximately 9.9% over the past ten years (the annualized return over the preceding 1-, 3-, and 5-year periods is greater),

(4) it is relatively low-risk (Morningstar rates it as having average risk, but the fund value decreased minimally during the last bear market),

(5) the fund manager has been around for a while (i.e., ~5 years - I actually would prefer a longer tenure, but I decided to make an exception here), and

(6) I can easily add and withdraw funds via the Internet.

Now, I am NOT pushing Homestead Value in particular, but certainly there are other mutual funds (most people probably should choose a no-load fund) with similar attributes that could serve an investor well. The upshot is that mutual funds generally offer increased rates of return, the opportunity for deferred gain (be wary of mutual funds that make a lot of dividend distributions as these will be taxed at ordinary rates), and preferential capital gains treatment (15% Federal) if the money is kept in the account for more than one year prior to withdrawal.

If you have little tolerance for risk (and there are plenty of good reasons why this may be the case), however, you should probably keep most/all of your money in savings/checking accounts, high-grade bonds, and similar investments.

Also, I realize that some people (e.g., JLarsen ) are not particularly crazy about mutual funds, but I firmly believe that they are, at the very least, a good investment vehicle for those funds that you may need to access on short notice. (Actually, I have done quite well with my mutual fund investments (knock on wood), but if I had the time to research matters adequately I would definitely invest more in individual stocks).

[Dan Gould]

Ever since my wife (before we married) got dinged with an enormous tax bill, she's insisted on putting herself in with zero deductions on the withholding worksheet. She simply prefers to get money back than risk having to owe. She'd rather deal with a lower net paycheck than actually have X amount of money to keep over the year.

The problem this year was getting her to get her business receipts in order so we could file. Otherwise we'd have already received the $2300 back instead of waiting til the end of this week (e-filing is a wonderful thing, thank God Al Gore invented the internet lo those many years ago).

[Quincy]

I make about half my income from investments, but don't even know under Dec 31 what the total will be, esp. if the market dips in Dec. So I always owe quite a bit. I haven't been hit with any penalties yet, but it is only a matter of time. I'll go ahead and pay a bit more in estimated taxes for this year.

I'm pretty sure that as long as you pay 100% of last year's tax, even if you have a very good year the next (which has happened to me for at least the past 2) you won't get hit with penalites.

For my state taxes I have to fill out 1/2 of their underpayment form (the easy parts), before hitting the magic line that says I owe no penalities or interest. Why I have to do this in a dozen lines when 1 saying "did you pay 100% of last year's owed" would do the trick is beyond me, but that's tax authors for ya! I then up the estimated for this year's to 100% of last. Only in bad years do I get a refund.

Edited April 16, 2007 by Quincy

[ejp626]

I make about half my income from investments, but don't even know under Dec 31 what the total will be, esp. if the market dips in Dec. So I always owe quite a bit. I haven't been hit with any penalties yet, but it is only a matter of time. I'll go ahead and pay a bit more in estimated taxes for this year.

I'm pretty sure that as long as you pay 100% of last year's tax, even if you have a very good year the next (which has happened to me for at least the past 2) you won't get hit with penalites.

For my state taxes I have to fill out 1/2 of their underpayment form (the easy parts), before hitting the magic line that says I owe no penalities or interest. Why I have to do this in a dozen lines when 1 saying "did you pay 100% of last year's owed" would do the trick is beyond me, but that's tax authors for ya! I then up the estimated for this year's to 100% of last. Only in bad years do I get a refund.

You just never know. When you have capital gains, you are supposed to be setting some aside or paying estimated taxes all along the way, but unless I paid an enormous amount of attention, I really wouldn't know until the end of the year, when I get the final statement from the broker, by which point it is pretty late. This year is particularly strange as I am filing F1116 and F2555 and am including and excluding foreign income, so it certainly looks fishy.

[Soulstation1]

i have less than a 2 minute walk to the post office from my place

[T.D.]

I make about half my income from investments, but don't even know under Dec 31 what the total will be, esp. if the market dips in Dec. So I always owe quite a bit. I haven't been hit with any penalties yet, but it is only a matter of time. I'll go ahead and pay a bit more in estimated taxes for this year.

I'm pretty sure that as long as you pay 100% of last year's tax, even if you have a very good year the next (which has happened to me for at least the past 2) you won't get hit with penalites.

For my state taxes I have to fill out 1/2 of their underpayment form (the easy parts), before hitting the magic line that says I owe no penalities or interest. Why I have to do this in a dozen lines when 1 saying "did you pay 100% of last year's owed" would do the trick is beyond me, but that's tax authors for ya! I then up the estimated for this year's to 100% of last. Only in bad years do I get a refund.

Yeah, I had decent capital gains last year, so had to go through all the rigmarole.

The state (NY) "underpayment of estimated tax" was a mild pain, because I didn't pay 4 equal installments (increased them slightly, figuring that I had some gains. This is, economically speaking, irrational, but I feared the spectre of a massive 4/16 payment. ). If you paid 4 equal installments, totaling at least last year's tax, it's an automatic and quick out. Otherwise you have to go through a worksheet. I wound up avoiding penalty, because each estimated payment was at least 1/4 of the required amount (last year's tax bill), but it was an annoyance. And I had to up my estimated payments a lot for this year. But capital gains means that I at least made some money, so I shouldn't complain too much...

And I had to do all my stuff early, in order to mail on Saturday, because we had a massive nor'easter which was expected to (and indeed did) shut everything down on Sun and Mon.

[Jazzmoose]

Mr. Brain Dead here got everything out at the last minute. Then noticed the check for the state sitting on the desk the next day...

Fortunately, LA allows until May 15 not April 15, so there's time to correct this "duh".