Did my taxes today - owe $1,500. Yeah!

[nanamom]

I understand the concept of not giving the Gov. a loan but I hate owing the IRS. WE got back a couple thousand this year which we were glad of because we had destroyed the EF by buying a house and a van in mid December. So it was nice to get most of it back where we had it (not where it belongs) We got money from the state too. We use it for vacation (grandkids we can hardly wait) and adding to the EF which has a long way to go to be where it should be.

[Ima saver]

I haven't done our taxes yet. We pay estimated taxes each year. Because our spec house did not close until Jan., we won't report the profit until next year, so we should get some money back. I will save it to pay next years taxes.

[Saving in So Cal]

Another reason not to get a big refund -- you could get audited.

Since we have been dual-income, no kids until recently, we've always had the maximum taken out of paychecks and sometimes stilled owed. (Don't even talk to me about the AMT.) When my husband decided to start a business in 2005, we did not change our withholding even though the business was not yet producing an income because we had quite a bit of paper income (e.g., we sold stock options to help pay for the business) and we didn't know how helpful the business deductions would be. (Some deductions are great. Some deductions don't help much at all, especially if you are subject to the AMT.) In addition, everytime I used the withholding estimator on the IRS's website (about 3-4 times), it kept indicating we would owe a ton of money.

Anyway, after the accountant figured out all of the business deductions (only the black and white kind), we ended up getting back an astounding amount of money. The accountant was shocked and we were shocked. As it turns out, so was the IRS and it wants to take a second look to be sure everything is correct.

Of course, 2005 was a pretty remarkable year for us with a pretty unique set of circumstances that won't ever come about again, but it was still a lesson to us not to be so conservative in our withholdings. We're not particularly worried about the outcome of the audit, but it is a lot of work to prepare for and, of course, it is one more stress no one needs.

[baking23]

Just becuase you've asked us not to ask, I will. What is that AMT?

[Gruntina]

a few years back I owed and I stil got audited! For some it just a random process and there is no way to prevent or avoid it.

[tabbycat31]

Just becuase you've asked us not to ask, I will. What is that AMT?

Alternative Minimum Tax....... a very nasty thing that has never been indexed for inflation (since the 60s)

[disneysteve]

Alternative Minimum Tax....... a very nasty thing that has never been indexed for inflation (since the 60s)

Yes, Congress seems to forget that inflation issue often, like when they established IRAs and didn't index the contribution limit which remained at $2,000 for 20 years.

[anonymous_saver]

This year I got back $900+ from Federal, $200+ back from the State, and $300+ back from Property tax. I only made $16,000+ last year and towards the year I started my new job which is more than double that income, and I have changed the witholding.

This year I am claiming 2, one for being single and one for having one job. At the end of the year I will be claiming more because I get a lot of tuition reimbursement from my job and will be taxed on it on my last 7 paychecks of the year. I will be changing my allowances at that time because I will be taking advantage of the Lifetime Learning Credit when I file my taxes. I know this may be confusing of why I don't change my allowances now, I am only waiting until the end of the year in the random case if I stop attending classes and so that when my checks are drastically lowered because of the tuition reimbursement that I can increase them to a more reasonable level - I will be using the IRS witholding calculator at that time.

Yep, that was too much information... and confusing.

[baking23]

A bit confusing but good for you. I was in the age group where I got screwed using my MET for college tuition. There were a few years I had to pay because the MET was considered income. Grr. Now it's too late to back-file, the law's changed again, but it's been longer than three years.

[tabbycat31]

Yes, Congress seems to forget that inflation issue often, like when they established IRAs and didn't index the contribution limit which remained at $2,000 for 20 years.

I never realized that about the IRAs........ then again I'm in my 20s and I've maxed out 2 so far (and I'm well on my way to the 2007 one....... that's where my refund $$ went)

About 1/10 of my clients so far have been hit with AMT. My parents got it big time.

[disneysteve]

I never realized that about the IRAs

IRA was introduced in1974 with a $1,500 limit or 15% of income.
In 1976, it was increased to $1,750.
In 1981, it was increased to $2,000 and stayed there until 2001, 20 years later.

Obviously, $2,000 in 2001 was a much smaller percentage of income than it was in 1981. At least they finally bumped up the contributions to the current $4,000. It goes to $5,000 next year and then will grow with inflation.

[Elgin526]

I got a $500 refund between Fed and State. I'm happy with that. I hate to owe, so I'd rather get a small refund. Yeah, I know I could have made 5% interest, but honestly, if the money was in my check, I'd likely find a way to spend it and it wouldn't make it to savings to begin with. This way I've got a nice little "bonus" I can use to bolster savings, pay down debt, or like what happened this year, fix DH's truck.

I don't think huge refunds are good though, anything over $1000 would have me looking at our withholdings to see if we could adjust it.