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Sunday, April 4, 2010

I Am Getting A Large Tax Refund - And I Hate It!

Yes, I know, I must sound like a crazed idiot, saying something like that! So, let me clarify. It is not the refund itself I hate - sure, I will take any money I can get my hands on. It is the fact that I am getting the money as a tax refund that I hate. You see, I just never understood why most people like it when they get a tax refund. I guess they think the government is giving them some money they did not expect to get.

I, on the other hand, understand the facts about a tax refund. To me, a tax refund means that the government is returning some money to me that I had lent to the government - lent to the government with no interest whatsoever. So, to me, a tax refund means that I screwed up thoroughly. It means that I sent in extra money to the government that I could have invested and earned interest on, and now I am getting that money back with not a penny of earnings to show for it.

Well, as you can guess, I did my taxes yesterday. Due to a combination of factors that I did not anticipate fully, I am getting a large tax refund on my federal tax return. Not only am I now mad that I am getting a refund instead of having adjusted my withholding to get my hands on that money sooner, I am also mad that I postponed doing my taxes for so long this year. I am usually done with my taxes by the first week of February, but that did not happen this year.

Usually, I adjust my tax withholding so that I end up owing the federal government a couple of hundred bucks come tax time. That is precisely the way I like it. No refund, but also not a huge deficit such that I would owe penalties on the underpayment either. I would complete my taxes in February, then print it out and send it out with my check for the tax payment on the 15th of April. After all, I don't see any reason why I should send them a cent of what I owe any sooner than when it is due!

This year, the thing that threw my calculations off was a tax credit for energy-saving home improvements. I got new windows installed in my home last year, and I remember the contractor telling me that I would be eligible for a tax credit. Unfortunately, I did not pay much attention to him and did not realize that the tax credit could be as large as it turned out to be. I got new windows because I needed them, not because of the tax credit. In my experience, such tax credits are tiny and are such a pain in the neck to get that it is not even worth it. But for a change, this tax credit was quite substantial (it is equal to 30% of the cost of the improvement limited to $1500 or your total tax liability, whichever is lower), and it didn't require more than a single sheet of extra paperwork.
tax form
Anyways, I guess I should not complain too loudly given the circumstances. In fact, most people would be ecstatic in my situation. I have a business idea to take advantage of the propensity of the American public to love tax refunds: Deduct lots of money from their paychecks for taxes, but instead of sending all of it to the government, just send in what they would owe in taxes. Invest the rest, and return it to them (minus the interest you have earned on it, of course) at tax time as a big "tax refund!" They are happy, you are happy, the government is happy - it is a win-win-win situation all around. Obviously, I have not put the business idea into practice, but if you do, please let me know and cut me in on a piece of the action too!

I am also getting a small refund on my state taxes. This usually happens because my state government does not allow me to adjust my withholding such that I can eliminate the refund. Whatever I fill out on my state W-4 form, my withholding always ends up with an overpayment which comes back to me as a small refund! This year though, I am paying almost twice as much in state taxes as federal taxes. Yes, you heard that right, I am paying twice as much to my state government as to the federal government. Between the various tax credits at the federal level that don't have an equivalent at the state level, my state is raking in the dollars while the federal government gets a smaller and smaller piece of my tax pie!

So, filling out tax forms is how I spent 3 hours of my Saturday afternoon. Being a salaried worker with a few investment accounts, and a home mortgage, that is all it takes me to fill out my tax forms. I never really understand when people complain about the complexity of tax forms either. I can understand the pain people go through when they are self-employed and have to go through tons of receipts from the previous year to figure out what is a deductible business expense and what is not. But for people like me who earn precious little outside of work (for which a W-2 exists), the tax forms can be filled out by a monkey if you train him to read and follow directions in English!

I use an online tax preparation service operated by a company called TaxAct. It actually takes longer to fill out the taxes on TaxAct than it would take to just print the form 1040 from the IRS website and fill it out by hand. But I do it using the TaxAct service because they allow you to do two things at the end of the process for free: They allow you to print out a neatly filled-out copy of your tax return along with all the required attachments and schedules. And they allow you to file your federal taxes electronically for free. Yes, absolutely free. Of course, the company has "premium" offerings that cost money, and which give you various "benefits". But I never sign up for them. And it is not because the company does not try to get me to sign up either - in fact, every two screens the company will try to convince you to try one of their premium offerings, but you just have to keep your eyes open, and opt out every time you are given a choice!

In fact, that is part of the reason it takes longer to fill out my taxes online - but I have put up with it because the software allows me to get a neat printed copy of my filled out tax return at the end of the process. And, if you are owed a refund, like in my case this year, the e-filing enables you to get the refund significantly faster than if you send in your tax returns by mail. Other years, I have simply taken advantage of the ability to print out my filled out tax return to mail it in with my payment on tax day. The software also allows you to run some sanity checks on the return to make sure you are not missing anything significant, but then, as I said before, for a person like me with a W-2, the tax forms can be filled out without mistakes by a reasonably well-trained, but not overly bright, chimpanzee!

My state runs its own website that allows me to file my taxes online for free. And the interface to this site is clean and easy to use. So, after I file my federal taxes, I spend 15 more minutes, and my state taxes are done too! I should have done all this 2 months back, but procrastination got me this year. Maybe I will do better next year.

What else did I do this week? Work was a lot more relaxed than the previous week. Since we completed the huge data-processing job last week, we could relax a little and slow down the pace of work significantly. I still had to attend a bunch of meetings and present the results of our analysis to a bunch of people. And I had to do a little bit of follow-up processing to answer some questions that arose, but it was all manageable without having to spend late evenings at work or even breaking a sweat during regular work hours!

My kids went back to school for the week after their spring break, so the house returned to sanity after a week of pandemonium. I wanted to take a couple of days off during their spring break and take them traveling, but those plans went for a toss because of the crazy work situation of the last week. Maybe I will do it during the summer. Which reminds me that I have to start making serious vacation plans for the summer. We have picked out a destination for the summer, but I have not started doing any travel or hotel arrangements yet, or even looked at getting started. It should be interesting, as always!

On my blog, I received visits from 3 new countries this week. Every time I think I have exhausted the interest potential of visitors from new countries given the content of my blog, more of them continue to show up! The three new countries this week were Monaco, Namibia and mainland China. Yeah, I know, I said earlier that I would never get a visitor from mainland China because that country's great firewall blocks out Google Blogger hosted sites. But I did manage to get one visitor from there onto my blog anyways! I have a feeling the visitor was probably not from China, but his/her IP was simply misclassified as being from China, but whatever the cause, I will take the flag anyways. I now have 118 flags in my flagcounter widget!

On last Monday, I published a post on a special type of query called a Job Candidate Matching as part of my series of posts on Access tips and tricks. On Tuesday, I published a post about Apple failures (I know that it sounds as silly as "French military victories", but Apple has actually had some failures, believe it or not). I thought it was appropriate given the launch of their new Ipad this Saturday. Then on Wednesday, I published a post on finding square roots of numbers using the Vedic Duplex method. For Thursday, I put together a bunch of tax jokes and one-liners to commemorate the start of tax-month.

Thursday was also when I received my latest phone bill from AT&T, and as I expected, in spite of their assurances to the contrary, they had charged me for the replacement modem they sent me. I called up AT&T on Friday and got the charges reversed (supposedly. I will know for sure only when I see my next bill). I wrote up my impressions of AT&T's billing practices in a post on Friday. And finally, on Saturday, I wrote up a brief post on a very powerful image editor called SageLight Image Editor that is being given away for next to nothing during the month of April. Read the post for details on how to get it. It is well worth the normal $60 price, but it is an absolute steal during this giveaway!

Next week might be quite interesting since I don't yet know what I am going to write about at this point. I am drawing a blank when it comes to stuff that I know, that might be interesting to anybody else! Maybe I will take a break from my blog for next week. Maybe not. You have to stick around to find out!

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