Quote:
Originally Posted by beefytwinkie
So every year you guys get that much in tax refunds because you claim as little as possible? If yes, what compels you to do that? Is it some sort of economic strategy?
Just to be clear, did you know that it's actually better if you owe taxes than to get large refunds at the end of the year?
Please tell me you don't get refunds in excess of $5,000 every year. And for those of you who do, you all need to seriously think about what you're doing because, as frankly and non-offensive as possible, that's just really freakin' strange.
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Exactly. From a time-value-of-money standpoint, and assuming there is inflation, it's best to get your money as soon as possible, and pay money as late as possible.
Some people use tax returns as a way of budgeting, and like to count on a windfall of money each year.
Just think of it this way: You earn $100, and will owe $25 in tax.
Option 1
Pay $50 in taxes, and count on getting $25 back on your return.
Option 2
Pay $25 in taxes, and use the other $25 you would've given them, and invest in something with it. Then by the time you would receive your $25 tax return, the $25 you invested will be worth more than $25.
Of course, given the current state of the economy, maybe it's better to let the government hold the money for a bit, so it doesn't lose too much value.
