Anybody else loan Uncle Sam big $$$

[Texas Proud]

I'm embarrassed to admit it but I'm one of those folks that gets a refund every year. I overpay every year (this year I got back $35000). It drives my accountant crazy. I know I shouldn't but for some reason I am really terrified of not having the money to pay Uncle Sam and I'm more scared of that than overpaying. I know it isn't financially smart to do and is completely irrational but the thought of not having the money to pay really scares me. I'm self-employed and my income isn't assured so I would rather pay the money when I have it than hit hard times and try to come up with it.

WOW.... talk about fear....

But, take heart.... back when I did taxes there was this one guy who thought the reason he had never been audited by the IRS was because he had NEVER asked for a refund... he always applied it to his next years return.... IIRC, it was over $500,000 that he was rolling over when I did the return...

AND, we could not convince him that he did not have to send in quarterly tax payments for the current year... so it grew...

This to me is 'irrational fear'.... but, if it let's you sleep at night then go right ahead..

 

[Dawg52]

I will owe roughly $2,500. Still waiting on my former employer's k-1 statement. Will probably have to file an extension. But back to the question, I don't see letting the government hold my money. I hear some people say 'it's a good way to save for my vacation or similar to having a Christmas fund'. Never understood that philosophy. I want some earned interest on my savings plan.

 

[ERD50]

I'm embarrassed to admit it but I'm one of those folks that gets a refund every year. I overpay every year (this year I got back $35000). It drives my accountant crazy. I know I shouldn't but for some reason I am really terrified of not having the money to pay Uncle Sam and I'm more scared of that than overpaying. I know it isn't financially smart to do and is completely irrational but the thought of not having the money to pay really scares me. I'm self-employed and my income isn't assured so I would rather pay the money when I have it than hit hard times and try to come up with it.

Open a separate savings account for your taxes.

I assume you pay estimates quarterly. Pay the 'right' amount (per your accountant) to the feds, put that excess payment (the amount you 'want' to overpay) in the savings account, if you feel you really need it.

I don't understand how you can feel the 'need' to overpay by $35,000? I can understand the need to pay what you will owe, but why so much excess?

As others have pointed out, if you pay 100% (or 110% at some AGI level) of last year's taxes, you will not owe a penalty. That is all you ever need to give the IRS upfront.

Every time someone tells me they like the idea of tax withholding as a 'forced savings plan', I offer to open a joint account with them. I will 'force' them to put $1000 each month into the account for the year (walk them down to HR to have an automatic deduction made to their paycheck). The following April, they can write me a letter requesting that I allow them to withdraw $12,000 from the account. I will write them back, telling them that I will be glad to process their request in 6-8 weeks, assuming there are no errors in their letter.

If I could get 100 people to do that, I could really pad my retirement spending with the interest I'd make. So far, no takers. But I get a kick out of the scrunched up look of cognitive dissonance on their face as they grapple with the idea that that is exactly what they are allowing the IRS to do to them - willingly.

Hey, a guy's gotta have some fun, no?

-ERD50

 

[Maurice]

I owe about 40k to Uncle Sam, and another 3500 to New York.

 

[Darryl]

I was within $100 total for State and Federal just where I like it.

 

[TromboneAl]

I know I've told this joke before, but:

A man and his dog are starving in the wilderness. They've run out of food, and the man cuts off the dog's tail, and uses if for soup. When the dog comes begging, be let's him have a few licks from the soup bowl.

And that's the general concept behind the tax refund.

 

[SteveR]

I owe, even with quarterly estimates.........oh well, Uncle Sam GAVE ME a loan for a few months.......

Some extraordinary things happened in 2007,not likely to be an issue in 2008.......

Same here. We owe both Fed and state due to some end-of-career and pre-retirement stuff...selling our cabin....exercising some company stock options...selling some investments...etc. We took the hit knowing it will not be this way for next year...we should be about even next year. Our estimated quarterly taxes for this year are 1/4 of what they were for last year.

 

[Ronstar]

I overpaid 26k. Probably due to a lower income year yet paying qtrlys calculated at 110 % of previous years tax.

 

[Dude]

Getting $36.00 back, pretty close!

 

[RunningBum]

Someone who does taxes now can tell if this is still true....

But, not really... they used to not count quarterly taxes the same... so, if you paid all your estimated taxes in Jan.... then you underpaid the three previous quarters and were fined for those underpayments.... even if you paid more than your tax liability in Jan...

What if a big chunk of your income comes in December, such as capital gains distribution or a large end of year stock sale? Would they take that into consideration, or are you supposed to anticipate that throughout the year and pay as evenly as you can estimate each quarter?

 

[tryan]

A man and his dog are starving in the wilderness. They've run out of food, and the man cuts off the dog's tail, and uses if for soup. When the dog comes begging, be let's him have a few licks from the soup bowl.

And that's the general concept behind the tax refund.

The tax credits put thru over the last few years have changed this somewhat ... The last two years we've been refunded THOUSANDS more we paid in. It's a reason to file.

 

[Texas Proud]

What if a big chunk of your income comes in December, such as capital gains distribution or a large end of year stock sale? Would they take that into consideration, or are you supposed to anticipate that throughout the year and pay as evenly as you can estimate each quarter?

Your estimates are supposed to be based on the income you had during the quarter.... like your withholding...

SO, if you had big capital gains at the end of the year, you are supposed to pay on the Jan 15th estimate...

And when you fill out the penalty form, then you split your income into quarters and see if you paid enough for that quarter...