Worst OT: Tax Day

Submitted by UMProud on April 18th, 2017 at 7:57 PM

Well today is the day tax returns are due...how did you do this year?

 

Unexpectedly I owed several grand and am very unhappy.

 

Comments

J.

April 18th, 2017 at 9:04 PM ^

Getting a few hundred back means that you loaned the US treasury money, at zero interest. :-) While savings accounts don't exactly have great returns these days, there still must have been something better to do with your money than let the treasury use it for a few months. :-)

J.

April 18th, 2017 at 9:57 PM ^

Nice to meet you too.

Every year I see people treat their tax refund like a windfall bonus, seemingly unaware that they're spending their own money that has been withheld from them.  Entire industries revolve around this practice (I'm looking at you, 'Instant Refund' tax preparation places).

Every year I wonder if those people would make those same purchasing decisions if they'd saved the money on their own.  Maybe they would have, or maybe they would have budgeted more toward savings, or fixed the leaky faucet one month earlier, or whatever the case may be.

The comment to which I applied suggested an incomplete understanding of these issues, so I replied in order to offer advice not only to the commenter but also to the rest of the community.

If this somehow offends you -- well, I've been hated for worse.

Longballs Dong…

April 18th, 2017 at 10:11 PM ^

Just is 100% accurate and I don't want to lend the government any of my money. However, most people are terrible at budgeting and saving. A refund becomes a forced savings account at 0% interest. Further, since most people have very little savings, it's much safer to over withhold and not be surprised to owe $2k you don't have.

Bigku22

April 18th, 2017 at 11:59 PM ^

I like using my tax refund as a savings mechanism. I usually receive $2000-3000 back at the end of the year. With current savings interest rates,if you put that money in a savings account for less than 12 months you would literally earn less than $2 dollars. I understand there are other things you can do with it, but acting like its the worst financial move ever it absurd. 

Also, I don't really see the anti-government point of view for holding your money. The US government is the most secure lender in world history, and I am a citizen of this country. It's fine with me. 

Tuebor

April 19th, 2017 at 9:17 AM ^

I think you mean the us government is the most secured debtor in the world.  Even so it isn't a great financial move to let someone hold your money interest free.

 

Try holding on to your tax payement for one year and see if the IRS won't demand you pay some interest or a fee for a late payment.

Longballs Dong…

April 18th, 2017 at 8:36 PM ^

the reason to wait is simple, I owe a lot of money and I'd prefer to delay that as long as possible. Further if you own REITs or MLPs, K1s can show up in April. I'd prefer not to pay early and still have to file an amended return.

But yes, if your return is a W-2 and nothing else file immediately and get your money back.

jblaze

April 18th, 2017 at 8:08 PM ^

I'm owed a refund and am pissed that I gave Uncle Sam an interest free loan. My accountant always wants to pre-pay my state refund for the next year and I don't know why.

Longballs Dong…

April 18th, 2017 at 8:41 PM ^

I assume at some point the government will get mad at me, but I owe every year and every year I'm provided with the quarterly prepayment slips. I disregard them every year and pay large sums on the last day possible. I assume the government cares to pursue the millions owed to them and has no time to get upset about interest on tens of thousands that I pay late.

M-Dog

April 19th, 2017 at 9:37 AM ^

Half the country is not "unable".  No way.

Everyone except the truly destitute should pay something.  

Government is not free.  It has a cost, both financial and otherwise.

If government if free for half the country, guess what they want?  More government.

Why not?  It's free.

If you are able to buy that 3rd flat screen TV, you are able to help pay for the level of government that you decide to put into power.

M-Dog

April 19th, 2017 at 10:09 AM ^

I'll stop.  I don't want to start treading into political waters.

I'm not anti-government, I've worked in 7 different Federal Governemnt agencies.  That has given me this perspective:

I don't hate the government, I just want it to do half as much, twice as well.

 

Gameboy

April 19th, 2017 at 4:55 PM ^

Then you need to go outside your bubble and see what is happening. 15% are at or below poverty level. Double that number for people who are within ten thousand of that and add baby boomer retires and you get almost half who do not make enough to pay federal income tax.

Still, these people pay sales and local taxes and when you add those taxes and fees, the poor end up paying more in taxes than a typical hedge fund manager.

Esterhaus

April 18th, 2017 at 9:37 PM ^

Doing something you "love." Any equipment purchased for the business can be deducted except for the portion utilized for personal use. And that's a gray line and you're basically on the "honor" system.

So if you like cooking, become a "caterer" on occasion and deduct the cost of your kitchen equipment dedicated to food prep as you see it. Become a "dj" and deduct the cost of equipment and music. Become a "consultant" in your field, and your wife as well.

You can also visit Salvation Army at least once a year and discard your old stuff. SA will give you a blank receipt if you ask and you can fill in a reasonable value for each item donated.

Plenty of ways to reduce your tax burden but most of them require some real work to avoid IRS scrutiny.

Longballs Dong…

April 18th, 2017 at 9:52 PM ^

Those deductions only work for a few years (3 I think). At some point the side hustle has to make money or be dissolved.

You can also claim unreimbursed work expenses for a bunch of random stuff. Again, it gets grey but the government doesn't care about you unless you're self employed or making millions.

Esterhaus

April 18th, 2017 at 10:00 PM ^

 

So roll up the business and start anew. Transfer assets or donate them and purchase new ones. Find a local artist who will make a unique piece of art at low cost and hold onto it. 5-10 years later, have the item appraised and donate it to a charity auction. Acquire a used car for less than book value and donate at full book value. I did state you have to work a bit to reduce the burden but it is possible for middle class and above to pay less once you make tax reduction a part of every day life.

Longballs Dong…

April 18th, 2017 at 10:29 PM ^

That's some aggressive scheming that probably won't work. Buying a car for 5k and donating it for 20k would be break even if your top tax bracket is 25%. It's worse than break even after transaction/holding costs and a discount rate.

I suppose the painting thing could work but it relies on you being a fantastic art investor (even if you assume the appraisal is falsely inflated for the auction). If it's that easy, quit your job and start flipping art.

As for the roll up shop and start a new business, that's not so simple either. a side hustle by nature isn't an S or C Corp. you can't transfer between two side hustles that have no legal structure.

Esterhaus

April 18th, 2017 at 11:54 PM ^

 

You can buy a bullet-riddled seized Beamer for less than 10k when it's worth a lot more even with the holes. Been there done that. The art is hit or miss but we've done well there. I'm not giving any specific advice, just emphasizing that there are a lot of options out there. Have you ever taken the home office deduction?  Me neither, it's one of the most cited reasons for an audit. I've been audited, she's been audited, and we've always walked out with even more money in our pockets because that notice made us even more shrewd in terms of compiling the tidbits. Your mileage may vary.

Longballs Dong…

April 19th, 2017 at 1:44 AM ^

I have taken the home office deduction, but it was legit. I was a1099 consultant and worked primarily from my house. I'm W2 now but still declare some home office expenses as unreimbursed business expenses. It doesn't really matter because I get hit with AMT every year. AMT is also why I'd never bother with car/art flipping/donating. It's a lot of work and I wouldn't get to take the deduction as expected.

I guess your plans could work, it just seems like you'd be better off selling those cars for a profit instead of donating for a deduction. Anyway, I have no issue with those tactics, so if it works for you, good.