Get A Tax Refund, Pay Taxes With Plastic @ The Roundup

by Silicon Valley Blogger on April 9, 2009

We’re finally going to get a tax refund this year, for the first time ever!

Some good news for us this tax year. For the first time ever (that’s over 2 decades, mind you), we’re actually getting a pretty hefty tax refund. This is in contrast to the significant amounts we used to owe the government during tax time because we didn’t withhold enough — a lot of which was due to the dividends we were receiving during a rising stock market.

Well, because the market has tanked, our dividends and interest earnings have tanked too. We’ve also been earning a lot less as a household, so we’re generating less taxes. But I do think that being self-employed helps in this regard, given the tax deductions that are available to us.

All in all, I’m glad that there are some positives that we’re still experiencing despite the gloomy economy. It sure feels good to get money back from the government. It’s such a foreign experience for us. As a whole, I feel encouraged that we’re able to roll with the punches, seeing as how the financial adjustments we’ve been making thus far have worked out: we’re spending less even with less income (relative to what we used to make), and we’re able to live on less. After a few years of our finances being “in the red”, this year, we’re on track to being back “in the black” (I like how that rhymes!). This will help cushion the blow of losing some of our investment gains during the last year, making it easier for us to wait out a stock market recovery.

How else is everyone doing in this economy? Let’s see what others are saying:

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{ 9 comments… read them below or add one }

1 Jeremy Slade April 9, 2009 at 10:13 pm

The tax system is set up so you don’t feel the pain of the taxes you pay. Giving the government an interest-free loan of *your* money feels good?

I’d much rather have zero withholding, and pay taxes in one lump, so that it HURTS! That would be the right motivation for everyone to care about how are taxes are spent. I wouldn’t mind earning interest on that money during the year, either.

2 Silicon Valley Blogger April 9, 2009 at 10:37 pm

Interest free these days doesn’t mean as much as it used to be. Yes, it’s a quick and dirty reaction to a tax refund, but in a strange way, I find it psychologically uplifting. Seems illogical for sure, but hey, a “windfall” is a mood booster no matter where it comes from.

I guess it was just a change for us to have this happen after 20 or so years of having to pay out large tax bills and having to see our account dwindle by that much. So it was a pleasant surprise, even though yes, it was due to some miscalculations we made on our estimated taxes. To be honest, our taxes are extremely complicated (even our tax guy complains), so I wouldn’t fault ourselves for erring on the side of conservative accounting.

By the way, if I had to pay all my taxes in one lump, we’d get penalties (not worth the interest we’d earn sitting on the government’s money). The way we used to pay taxes, we’d be in trouble if we didn’t have withholding. Way back when, even with 0 deductions taken, we still owed.

3 Baker @ ManVsDebt April 10, 2009 at 5:23 am

Hey, congrats on getting back a return this year! I went in thinking I was going to owe taxes, however I grossly underestimated the tax benefits of our first child (born in 2008). We also are getting back a hefty refund. I agree the feeling is awesome when you’ve been used to paying!

Also, thanks for the link love! I’m glad you enjoyed the post!

4 Do You Dave Ramsey? April 10, 2009 at 6:16 am

I love the positive message you’re sharing… even as things are in a down turn, you are receiving a refund… and your increased diligence through this time position you for even greater success in the future.

Sometimes you have to step away from the mechanics of withholdings etc and simply celebrate the positives of the moment. I think that mentality is really what sustains us over the long term.

Thanks for sharing…. also some great stuff in your round-up!

Dave

5 The Personal Finance Playbook April 10, 2009 at 6:21 am

Thanks for the link! We got a few hundred bucks worth of a tax refund. Sure that money could have been earning interest, but it would have been a trivial amount. If I made more money and had more coming back (my father in law got 55k) I might worry about the interest. In my situation, I’m personally just glad I didn’t have to pay them this year. I also must made a mistake on my taxes, because the IRS actually sent me a letter saying I got more than I thought I was getting back. I’ve never knew they changed errors in your favor. It was refreshing, and it made me happy.

6 Foobarista April 10, 2009 at 11:44 am

We always target our withholding to hit the “safe harbor” for the previous year, and have a special “tax” savings account where we put some of my wife’s self-employment income. The amount in the tax account isn’t entered into our net-worth spreadsheet.

When we do our taxes – and we usually owe – we pay the taxes due out of that account, and the rest is our “refund” as it’s put into our general savings account for investment, etc – and then shows up in the net worth.

7 Greener Pastures April 10, 2009 at 2:44 pm

Congrats on having more money than you thought coming back!!

Last year deductions worked against me. I had sold some stock and had a higher income than anticipated. I had to pay up big time when taxes were due. Ouch.

And congrats on being back in the black! I have a ways to go on that one.

8 Roll Off Chicago August 25, 2009 at 1:59 pm

It’s good that you’re getting a little extra boost in these times! Thanks for sharing

9 Quatinn September 14, 2009 at 1:59 pm

It’s great to hear that you’re finally getting a real refund. I usually rely on my employers to do my taxes right so I almost always get a refund.

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