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sk8er1964
03-28-2011, 12:57 AM
After having to pay something like $2000 one year to the IRS, I'd rather err on the side of caution.

To each his/her own, though.

Aceon6
03-28-2011, 04:07 PM
I guess it depends. My husband is a Schedule C filer, so we always over pay on my W-4, just to be safe. No sense setting up red flags for quarterly estimated tax payments or for a possible audit.

genevieve
03-28-2011, 04:23 PM
to each their own. I get making sure you're covered for uncertainties (such as in Aceon6's case), and I do understand the rush of getting money back each spring (the only time I've ever gotten a refund over $500, it was right after I ran up a huge vet bill and was grateful), but if you are consistently getting more than a couple hundred dollars back, you are in fact loaning the government your money all year long. Which is fine if that's how you want to do it, but I'm shocked at how many people think their refund is actually money the government is giving them. they don't understand that it's their money they're getting back.

I had a friend who wanted to deduct an additional $100 per paycheck so she would get a bigger refund in the spring, even though she was already getting over a $1000 refund. I asked her why she couldn't just open a new savings account and have $100/paycheck deposited there (we can split our paycheck direct deposits) and she said having the government hold it for her made her feel safer :wall: This is one of the most disciplined person I know, who would never spend money she had designated as off limits.

Debbie S
03-28-2011, 04:42 PM
to each their own. I get making sure you're covered for uncertainties (such as in Aceon6's case), and I do understand the rush of getting money back each spring (the only time I've ever gotten a refund over $500, it was right after I ran up a huge vet bill and was grateful), but if you are consistently getting more than a couple hundred dollars back, you are in fact loaning the government your money all year long. Which is fine if that's how you want to do it, but I'm shocked at how many people think their refund is actually money the government is giving them. they don't understand that it's their money they're getting back. Sometimes, though, you don't have control over what you pay 'into the system'. Most of my refund comes from my deductions of mortgage interest and property taxes. I'd like to pay less of those each month, but I don't have a choice about it. ;) And I'm single, so I think my only options for withholding allowances are 0 and 1 (which I have).

PDilemma
03-28-2011, 04:44 PM
Sometimes, you get a refund because circumstances change. I used to typically get less than $100 back. This year, I left my full time job and went back to school in August. The drop in income and tuition deductions meant that we got a larger refund than normal. And that was with my current income sources not having any state or federal taxes withheld and our being required to pay taxes on money we withdrew from retirement to pay for school. Next year, we should be back in line according to the available tax tables for 2011.

A lot of people don't want to or don't know how to figure out what they will owe and are simply at the mercy of how their employer deducts during the year, as well.

Aceon6
03-28-2011, 04:58 PM
Sometimes, though, you don't have control over what you pay 'into the system'. Most of my refund comes from my deductions of mortgage interest and property taxes. I'd like to pay less of those each month, but I don't have a choice about it. ;) And I'm single, so I think my only options for withholding allowances are 0 and 1 (which I have).

Actually, you can claim more if you're expected deductions justify it. Use the worksheet on the back of the W-4. Anyone in a state income tax state who owns a home should look into it.

genevieve
03-28-2011, 05:17 PM
Sometimes, though, you don't have control over what you pay 'into the system'. Most of my refund comes from my deductions of mortgage interest and property taxes. I'd like to pay less of those each month, but I don't have a choice about it. ;) And I'm single, so I think my only options for withholding allowances are 0 and 1 (which I have).
I'm single, own a home and I claim 2 deductions.


A lot of people don't want to or don't know how to figure out what they will owe and are simply at the mercy of how their employer deducts during the year, as well.
No one is at the mercy of what the employer deducts. People can take the most passive route possible for determining their withholding, but the employer can't just decide what to deduct for them.

PDilemma
03-28-2011, 05:37 PM
I'm single, own a home and I claim 2 deductions.


No one is at the mercy of what the employer deducts. People can take the most passive route possible for determining their withholding, but the employer can't just decide what to deduct for them.

If employees are passive about it --which is usually due to more to not understanding the process, the tax tables or that they can request higher deductions than willfully being passive--the employer will withhold as they see fit based on what deductions the employee indicates on paperwork. And that is what I meant.

But this is, quite frankly, a pointless argument. Some of you are never going to comprehend that not everyone has the knowledge or skill set to understand tax policy and take control of their own finances in that area. It is foolish to think that in a culture where most people don't know how to balance a checking account or manage their credit, everyone is going to understand withholding and tax tables.

genevieve
03-28-2011, 07:43 PM
If employees are passive about it --which is usually due to more to not understanding the process, the tax tables or that they can request higher deductions than willfully being passive--the employer will withhold as they see fit based on what deductions the employee indicates on paperwork. And that is what I meant.
But that's not as the employer sees fit - it's based on what the employee puts down. My point is that the employer cannot make any decision about what an employee deducts - it has to come from the employee. Now, the employee may not be making most advantageous deduction for themselves (through choice, ignorance or lack of comprehension), but the employer does not get to look at the W4 and say "this person doesn't know what they're talking about, I'm going to deduct a different amount instead".


But this is, quite frankly, a pointless argument. Some of you are never going to comprehend that not everyone has the knowledge or skill set to understand tax policy and take control of their own finances in that area. It is foolish to think that in a culture where most people don't know how to balance a checking account or manage their credit, everyone is going to understand withholding and tax tables.
And how is perpetuating the notion that employees are at the mercy of their employers when it comes to tax deductions going to help?

Hannahclear
03-29-2011, 12:42 AM
I was just talking about this with an accountant, when we filed this weekend. He said that most people don't understand that there is a *number*. It's the amount you make with your tax obligations removed. You can get that number spread out over 52 weeks, or you can get a chunk of it back in the spring. But it's still your number.

And with interest rates being what they are these days, unless there is high-interest debt, I don't think it matters which you choose. It's personal preference. I prefer the money over the course of the year.

Erin
03-29-2011, 02:15 AM
I had a friend who wanted to deduct an additional $100 per paycheck so she would get a bigger refund in the spring, even though she was already getting over a $1000 refund. I asked her why she couldn't just open a new savings account and have $100/paycheck deposited there (we can split our paycheck direct deposits) and she said having the government hold it for her made her feel safer :wall: This is one of the most disciplined person I know, who would never spend money she had designated as off limits.

:eek: I generally agree with the sentiment that the decision mainly comes down to personal preference, as long as people understand what they're doing, but this kind of thing is a little bit crazy.


And with interest rates being what they are these days, unless there is high-interest debt, I don't think it matters which you choose. It's personal preference. I prefer the money over the course of the year.

Yes, I agree. Although for some people who I know who are not very disciplined savers, I sometimes think it really is better to lend it interest-free to the government, just to keep them from spending it.

I do agree in theory that it's generally better to get the money spread out, but in practice, I've ended up with a reasonably large refund more often than not, for a variety of reasons. Job changes, tuition credits, or a last minute deductible RRSP contribution are a few of them. Canadian payroll withholding rules seem to be a little stricter than US, as in some cases I'd need to get a letter from my tax services office to get the withholding reduced because my reason isn't on the form that you can provide my employer. And that is way too much work.