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When interest rates were higher, I cared more about avoiding getting a big refund. At the lousy 1% interest rate in my Ally Bank account and the 28% tax bracket, a $1,000 refund built up by being over by $80.00 per month would be $5.00 in interest and I'd owe a buck+ in Federal income taxes on it. I'm not going to change my W-4 over less than $4.00. My cocktail napkin 2016 tax calculation assuming I only make my base pay shows a $700 refund a year from now. I miss out on $3.00 of possible interest income. Close enough.
I think it's more that people don't want the GOVERNMENT making any interest on that money!
I'll confess it, I don't like the idea that in lending the government money interest free. I know logically it's very little... But it's the principle.
I suppose it sounds like trying to calculate all this might be splitting hairs. But I kind of enojy saving a little or cutting costs as much as I can. It's almost a hobby.
I ended up owing $400 this year, at $70k gross and claiming 2 (I'm single, don't own a home, take standard deduction). This thread inspired me to lower exemptions to 1. I wouldn't mind a small refund. I originally raised exemptions 2 years ago from 0, where I always got a few grand back, to 2, because I was struggling check to check and needed more money on hand. That's no longer the situation, so I am comfortable making the change back.
I literally write my own paychecks (small business, and I'm the office manager, so I write all the checks), so I just hold out whatever I want. This year, I'll owe about $700 total, which is in my acceptable window. I shoot for owing less than $1000. I've already adjusted for 2016, and will hold out an additional $500ish over the course of the year, so I'll hopefully owe a little less next year.
I find it comical that there are even concerns about the "lost interest" because we've left the money with the IRS until tax time especially when are taking about such small amounts. Today's interest rates are so low that it doesn't make sense to even worry about it.
BINGO!!! It's an easy way to save up some money if you're not great at saving. Moreover, as I've said before, I don't hate my country, so I'd sooner let the government use my money for free than let bankers do the same.
I find it comical that there are even concerns about the "lost interest" because we've left the money with the IRS until tax time especially when are taking about such small amounts. Today's interest rates are so low that it doesn't make sense to even worry about it.
Yeah, savings rates are nonexistent these days. I view my tax rebate as sort of an enforced savings discipline. I take out the maximum and get a pretty large rebate every year. I wasn't going to invest that money, after all - it would have just been spent on incidentals. The big rebate lets me knock out a big-ticket item every year - usually something that significantly affects my quality of life.
Last year, I bought a food saver and a chest freezer with some of my rebate. That's been amazing - I spend less on eating out, eat healthier and generally am thrilled to death that I invested in those items. This year, I may be putting it all into a savings account for a while or I may use it to install a fence I've been wanting on my property and pull out some shrubbery.
If you're not making ends meet from month to month, then by all means look for a way to lower what gets pulled out of your paycheck for taxes. But if you've got discretionary income that you're not planning on investing and aren't great about setting money aside, might as well let them take the max
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