Why do people get so excited about getting a tax refund? (1 Viewer)

[Craig S]

An Income Tax Refund is an enforced savings plan.

At best it's an enforced short-term savings plan, as most people spend their refund rather than rolling them into other savings.

I've got withholding adjusted perfectly now. I'll owe Uncle Sam $32 this year, which I will happily send out on April 14.

 

[Ron-P]

It's funny how some people generalize and think that if you get a semi-large tax refund, your a bad financial planner. :rolleyes

Everyone likes to due their taxes differently. I purposely set mine up for a refund (in the 2-3k range), it's our vacation money. We do not set aside for vacation's out of our yearly budget.


Peace Out~

 

[eric holm]

One point for me is that with interest rates where they are currently, you really are just talking pennies.

 

[Chris Derby]

hey ron,

so when are we goin to mammoth? i've already got my next trip planned the first week of march.

 

[ian_graven]

Why do i get excited about tax returns?

Because i get more back than i put in. Earned Income Credit is nice. In 2001 i paid 4oo dollars in federal tax. I got a return of almost 4000 back. Can't beat free money.

Now i make over the 35k cutoof for eic and only get back what i pay. The first two years of collecting earned income credit was great

 

[Cees Alons]

Why they are excited? Here's 5 reasons immediately:

1. It looks like easy money.

2. You look smarter somehow than someone who has to pay additionally.

3. Even considering that little rent matter, it's better to get a refund than to have to pay extra anyway.

4. Money grabbed from those gov.-hands makes the citizen happy.

5. Ecstatic that they didn't find out those little, uhm, involuntary inaccuracies that happened while you were filling in the form.


Cees

 

[Patrick Sun]

Usually very few people can tell you what they actually paid to the government when asked how much in federal taxes they paid last year. They usually can only tell you whether they got a refund or had to pay more to Uncle Sam.

 

[MarcVH]

Yup, people mainly see how much their refund is. They may also notice how much money is withheld from paychecks -- for example, if you get paid a bonus, it gets withheld at a higher rate than base salary. People infer (incorrectly) that this means bonuses are somehow taxed differently than regular income.

With interest rates as low as they are, the "interest-free loan to the government" isn't necessarily all that big a deal. The main thing is to make sure you don't have to pay a penalty.

 

[Tommy Ceez]

Because i get more back than i put in. Earned Income Credit is nice. In 2001 i paid 4oo dollars in federal tax. I got a return of almost 4000 back. Can't beat free money.

Ladies and Gentlemen, the exact reason why Pres. Bush is trying to reform the tax code. The forced siesure of my earned income in order to subsidise another person's life. Absolutly no offense to you Ian, you dont make the rules, you just follow them. However, my consumption tax suggestion looks even better now, huh?

BTW, mods, Taxes are not a political topic ut purely an economic one. I understand that political topics are taboo so please understand that my suggestions are of a macroeconimic nature.

 

[Patrick Sun]

Let's be careful, as soon as someone goes into political party bashing (either side) for tax reform/et al, this thread is toast.

 

[Tim Markley]

I think that it's very interesting to hear the different reasons for doing taxes different ways. There's definitely no 'right' or 'wrong' way.

 

[MarkHastings]

It's like anything else. How many times do you hear someone get SO excited when they win $100 on a slot machine, and not take in account the $1,000 they lost to get to that $100 win. Or the person that wins $50 on a scratch off ticket, when they've spent hundreds of dollars in the past trying to win.

It's all about a chunk of money coming to you all at once, and since the money you may have spent to get to that chunk doesn't really matter because you've been able to live without it up 'till that point, it seems exciting.