Wow, that was some damn ugly coding/posting, wasn’t it?
Serves me right for getting worked up about the IRS!
Appreciated, but not necessary, oh heavily inked one from the land of Kotter, as I anticipate my tax woes are near an end. 
Try to think of all the good things your president will use that $500 for. Maybe he’ll buy a piece of plate armor for a GI in Iraq. Or maybe a glass of chianti for the inagu…innagu…uh, swearing in thing in DC, or maybe he’ll give it to a public school teacher, or buy some death row prisoner’s last meal with it…Lord knows you won’t see it when you head down to the rat-infested Social Security office when your retirement age draws near.
Not to nitpick…
But this obsession over the “extra” $500 is what bugs me. There are so many people in the US who think that when they get a “refund” they are getting “extra money”. Or, when they have to pay on April 15th that they are paying “extra”.
No, you are paying your tax bill in both cases. In one case you paid more than required and are getting the difference back; in the other you paid less than you owed and must make up the difference.
The system is set up to make you feel this way. Taxes are withheld before you see your money.
I have a simple question for you:
How much did you pay in federal income tax this year?
If your answer is “$500” or “I got a refund” then you have been had. The number I’m looking for is the TOTAL amount paid during the year. Money taken out of your paycheck before you ever saw it.
It’s there on your W-2. Go ahead and find it. Use your last 2004 pay stub.
Take a moment and compare that number to others. For example, compare the amount of tax you paid (and for WE this would include all of the NY taxes) to the amount you paid for your mortgage/rent.
I am a single guy in Texas and my income tax bill for the year is MORE THAN my rent, utilities and insurance. It’s the single largest expense I have.
Refund? My ass! They’ll be lucky if they get my payment postmarked on the 15th!
You do know that all those festivities are financed by private donations, right?
Hmm. It is just possible that if you live in a State with a large Income tax, and you have some normal charitable contibutions*, you might be able to save a couple hundred bucks by itemizing. I assume you don’t own a home or anything. Ok, then, go ahead and get your taxes prepared this year. Oh, and unless you’re covered by a retirement plan, you can save nicely by starting an IRA. In fact, you can still put $2000 towards last years IRA and deduct that on this return we’re talking about.
- here- it’s perfectly OK to throw some reasonable estimates. No one expects you to have reciepts for minor cash out-of-pocket donations or for that stuff you tossed in the Salvation Army bin- within reason, of course.
"D.C. officials said yesterday that the Bush administration is refusing to reimburse the District for most of the costs associated with next week’s inauguration, breaking with precedent and forcing the city to divert $11.9 million from homeland security projects.
Federal officials have told the District that it should cover the expenses by using some of the $240 million in federal homeland security grants it has received in the past three years – money awarded to the city because it is among the places at highest risk of a terrorist attack."
http://www.washingtonpost.com/wp-dyn/articles/A63896-2005Jan10.html
Yes it will. Should be about $400.
The reason you owe this year as opposed to last year is probably because of your bonus. A couple of years ago, the IRS changed the w/h tables to where employers didn’t w/h as much. Caused a lot of people that were expecting a modest refund to owe taxes.
As far as the “interest free” loan thinking…If you get a refund $1000, the average balance would be $500. In a passbook at .5%, you’re missing out on a whopping $2.50.
If you just bought a house, look thru your closing statement. You probably paid some taxes and interest in the closing. Those are both Itemized Deductions that can help you out. If those plus your mortgage interest plus state taxes s/h (or sales taxes, which ever is greatest) plus r/e and personal property taxes plus charitable contributions exceed $4,850, you should itemize and that will help.
If you’re looking for someone to do your taxes, let me recommend Jackson Hewitt. Should cost less than $150. Get a coupon off of the website to save a little money. (Full Disclosure: I work for JH)
URGENT WARNING!!!
H&R Block screwed up my taxes for 2001 so badly that I will probably have to file for bankruptcy later this year. At present, my highest financial priority is to keep the IRS and State Revenue Department from seizing my retirement funds and garnishing my salary. All other bills, except rent, utilities and transportation expenses, are going unpaid. Do not under any circumstances use H&R Block.
Thanks guys, there’s a lot of help here. My main concern of course is that I’ll go pay $100 to do my taxes and still get stuck with the $500. Of course If I can whittle it down to less then the $500 I owe plus preperation costs it’ll be worth it. Maybe the school thing will work in my favor. To hijack my thread, because I think it’s relevant, I’ve been looking to invest a small lump of money. You know, the 'ol take $2,500, dump it somewhere, and come back to $50,000+ twenty years down the road. I was looking at some Dreyfus mutual funds, something spread around like the SP500. I don’t have a 401k, so let’s get that out of the way. My goal is to syphon off a thousand or so a year into the fund, so I need something with some auto debit action.
*usual disclaimers about taking financial device, etc, etc. I’m just looking for a push in the right direction.
Couple of suggestions:
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I’ve used TaxCut software the past few years, and it’s worked well for me. My returns are a little complicated, but the program has performed well. As far as I know, it’s the only tax program associated with H&R Block, but I they could have an in with the TurboTax people too. TaxCut is recommended by Kiplinger’s Magazine (again, they have a stake in it, so take that for what it’s worth).
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On the investment you want to make: You need to ask yourself a few questions up front, with the primary question being “Do I need to have access to this money in the short-term, or can I live without it completely?”
If you don’t foresee needing the money at all, then a tax-deferred or tax-exempt investment makes sense. A traditional IRA or a Roth IRA would be good choices here, or even a variable annuity. You can fund them with a selection of mutual funds to play the stock market without paying taxes on your capital gains earnings. (A traditional IRA grows completely tax-free until you touch the money, and you get a deduction for the amount of money you pay into it – up to a certain point. A Roth IRA provides no up-front deduction, but the money placed in it grows completely tax-free, i.e. you never pay capital gains tax on that money.)
If, however, you think you might need to dip into that fund periodically, you need to avoid those long-term savings options and go with straight mutual funds.
Well the intention is not to touch it at all. I know I don’t need it for at least 10 years, but after that who knows when I’ll be looking to buy a house. Is there some sort of penalty that would be levied or am I simply unable to touch it until date X? I (like 99% of people) would like to maximize this investment as much as possible.
I’ll also mention that I’m concerned about the long term growth of the economy, as in will there be any? I see Europe, and especially China picking up steam, and wouldn’t mind getting some of that action. Perhaps a internationally flavored fund? I guess though that the companies of the SP500 are all multinational, so maybe it’s a moot point.
Personally, I use TaxCut also. Hell, it only cost $20 bucks. Before I went to a paid preparer, I’d go get a copy and work thru it just to see if it could save you a few bucks.
Since you’re not covered by a 401K (and thus don’t have a pension plan), you could put up $2,500 and take a deduction for it. Of course, like Sauron said, you couldn’t touch till you were 59 1/2 without paying a penalty (exceptions do apply).
This can answer some of your questions on IRAs.
Not to get too personal here, but it depends on your age. Any funds taken out of an IRA (either Roth or traditional) prior to age 59 1/2 are subject not only to traditional income tax in the year you access them but also to a 10 percent penalty right off the top. Ditto for most annuities. So, if you think you’ll need the money before age 59 1/2, those options are not for you.
Sounds like straight mutual funds or individual stocks are your best bet. For what it’s worth, the inflation-adjusted return on investments in the stock market has been something like 7 percent annually for decades, even factoring in the crashes in 1929 and 1987.
You can invest into mutual funds in a variety of ways. One of the most popular ways is “dollar-cost averaging,” wherein a set amount is deducted from your checking account each month and placed into the fund(s) you choose. The mutual-fund company can do this for you, or you can count on yourself having the fortitude to do it. Or you can, as you noted, just plonk a chunk of change into the funds once a year or more.
Vanguard, Fidelity, T. Rowe Price, Dreyfus, State Street Research and a host of other companies have some good mutual fund offerings. My opinion means squat, but I’d recommend looking at SmartMoney’s list of “bedrock” mutual funds. They’ve done a boatload of research on funds, including average return, expenses, turnover, etc. and identified a number of funds that tend to perform well across a wide variety of investing styles and goals.
Do you have a retirement plan from work?
Actually, $3000 for 2004 (you have till April 15th, 2005 to deposit)
And for 2005, it gets bumped to $4000.
Max it out if you possibly can.
Here’s a link to the Max Contribution Table.
Again, this article also makes a note to max out your contribution every year if you can.
I recieved $315 interest (about 6%)on a $10440 refund for a total of $10755 for my 2003 personal taxes. You may have a point here about “normal filing times”, but my interest was probably earned (WAG) from the period of 4/15/04 (the due date) to roughly 10/15/04. I always extended my tax deadline to October 15th (6 months later), because I have an S corporation where my wife and I have passthroughs (the company’s profit/loss becomes our personal profit/loss). I wait on purpose so my CPA can spend more time on my return to find any other legal deductions that may have been missed…this $10,000 overpayment was found because of finding some tax code dealing mainly with expensing certain equipment instead of depreciating it. So, looking back, Brutus is right about giving the government a “free loan” if you get a sizable refund when you file…the ideal return should be as close to $0 as you can possibly estimate. On the other hand, I need a CPA to figure out what the hell is gonna happen to us every tax year and how to prepare for the next, although have 3 months left of the following tax year to adjust can be “taxing”. It could also go the other way (owing interest) if I didn’t pay enough in, plus penalties (unless I follow certain rules which means paying 100%+ of last years taxes in a timely manner).
Sorry, lissa…I don’t think this helps you with you situation.
Nope. I’m 31 and already feel like I’m starting this stuff late, so I figured now or never.
Sad to say Yeticus, but I haven’t donated a dime this year.
<hangs head>