Now that tax time is over, we can all step back a bit and relax.
Even though I use a CPA to do my taxes, it’s a stressful and busy time for me. I can’t imagine how bad it is for people with complicated taxes who do their own returns. Ugh.
Anyway, I thought we’d talk about a “fun” tax topic today — tax returns.
I know getting one is not the objective (after all, who wants to lend the government money with 0% interest?), but they do happen.
For my family, the swings of paying/getting a refund can be quite wide. Sometimes we owe and sometimes we get money back.
It’s hard to estimate our actual liability within reason in most cases and this past year was worse than normal. Given the fact that we moved, shifted jobs, have to deal with the alternative minimum tax, and on and on made 2105 taxes a hard one to guess at.
What Happened
When the smoke from doing the returns cleared, here’s how we netted out this year:
- Federal — Got $16k back. The combination of over-paying Social Security taxes in a big way (this happens when you have two highly compensated jobs in a single year) plus having a ton of money taken out of a bonus check I received resulted in a large payout.
- Oklahoma — Got $3,500 back. Not sure why we got so much back here other than I was just taking too much out for state taxes.
- Colorado — Got $160 back. Pretty close here. Better than owing $160.
- Michigan — Owed $1,100. This was on earnings for my rental properties.
What We Did
So, what did we do with the $18k or so we netted?
You probably won’t be surprised when I tell you we invested it. 馃檪
I put more in my P2P investments (I’ll be giving you an update on how they are doing in the next few months — short version: I’m doing VERY well) as well as replenished a savings account I have for some upcoming purchases. Nothing glamorous at all. But that’s much of the path to become wealthy — make simple, good, and BORING decisions over and over again for year after year.
How about you? Did you get a refund or owe money? If you got a refund, what did you do with it?
I also like to be as close to $0 as possible yet it never really happens.
Factors like college tuition tax credit one year for one dependent, then tuition tax credit for two dependents the past two years have given me a boost in a refund. This year I will lose a dependent but still have one in college so this year I might be closer to 0$ with the tuition tax credit. Then there is my wife is thinking about retiring from full time teaching in a year or two and out youngest will be done with college so possibly another depended loss. Retirement for my wife who has a pension will mean a reduction in income and changes in taxes but she might work part time.
The variables are endless on the influence in taxes.
As for the refund it just went back into the college fund for next year鈥檚 tuition hike.
I actually don’t mind getting a decent sized tax refund at the end of the year. It gives you something substantial that you can do something with. For the past several years I have been lumping my tax refund in with my annual bonus and dividing it three ways. The first third goes to paying down our mortgage, the second third goes to padding the kids’ college funds and third goes to enjoyment!
It’s been working well so far and the satisfaction I get from receiving a big refund is greater than the loss I feel in loaning the government free money for a few months.
We received very little in refunds for 2015, ~$1800 federal and ~$1000 state. They went into savings that will eventually go into investments.
For 2014, false returns were filed in our names (both state and federal). The state problem was cleared up quickly but the federal problem took almost a year to resolve (it would have taken much longer had I not pushed, pushed, pushed). We were expecting a five figure refund from the federal government (which we finally did receive with interest) but it really brought home the importance of not expecting a large refund (besides all the other good reasons).
“the swings of paying/getting a refund can be quite wide. ”
That’s quite the understatement.
I have zero idea what our tax liability will be and what we should be getting back until I do a tax estimator following the end of the year while I’m waiting on some documents (and it’s 2016, you shouldn’t have to wait more than 1 week for it all IMO). I would try to have it where we get back a few hundred a year, but it ranges from $2k up to $5k for the last 7 years – since we’ve had kids. We end up claiming something like 8 on our W4 for Federal, but have to claim 4 for NC state for a family of 5. And it’s not like have a complicated return. W2 wages, dividends and interest coupled with a standard deduction (when you don’t have a mortgage, it’s tough to get up past the limit)
Just got mine in the mail a few days ago (bank didn’t accept direct deposit for some reason..)… we typically put ours in the vacation fund unless it is very large. This year it was much smaller because I started working a part-time job while in school and didn’t withhold any money, so will pay all our entertainment costs from a recent 12-day trip.
We overpaid by $7800 but let them keep it for this year’s estimated quarterly taxes. We won’t owe anything until September and then it’s just a couple of thousand. That means that I had $4500 set aside for our first estimated quarterly tax payment that wasn’t needed. We are using about $500 to buy a new dishwasher and putting the rest towards our 2016 SEP IRA contribution.
Wow, congrats on the very pleasant refunds. I bet that felt nice, getting it all back. Good on you for putting your money straight to work.
Tristan