Weird Old World.2

[akirlu]

Realized while discussing family finances: this year, overpaying your income taxes by not jiggering your withholdings may be one of the better financial investment bets to have made. Oh, sure, when you get your tax refund in February, you won't be paid interest on the time the Fed had it, but on the other hand, you'll get 100% of your overpayment refunded. If you jiggered your with withholdings and put that same money into stocks, bonds, money markets, or mutual funds, you might only be able to cash out about 70% of your investment, or less, now. So, overpaying your taxes outperforms the stock market. Go figure.

Comments

[ckd]

Heck, until the USD rallied a bit "keeping leftover cash from foreign trips" was an incredibly good investment. Between CAD, GBP, and EUR from various visits I think I had a fair bit of it around, mostly from 2007 when the dollar was higher than it's been for the better part of this year.

[akirlu.livejournal.com]

Yah, I've been freaked out by the robust CAD for a coupla years, now. On the other hand, it brings Canadians down for more book shopping trips here in the US, where the books are cheaper, being sold at the lower US price for the weaker USD.

[randy-byers.livejournal.com]

That's so earlier-this-year. CAD is at .81 USD today.

[akirlu.livejournal.com]

Wow, we have re-achieved 'normality'. And down in Kent, the Meeker St. Arco has regular gasoline for under $2. That's one tenth of a penny under $2, but still $1.99.9 for regular. How retro is that?

[randy-byers.livejournal.com]

Hadn't heard that! Cue video of clocks whirling backwards. I feel younger already.

[daveon.livejournal.com]

This is one of the weirder "features" of the US tax system that I'm having to get used to. I'm just so used to the amount that your employer takes being the amount of tax that you owe that this alternative system just strikes me as odd.

[dd-b.livejournal.com]

My taxes depend on things my employer doesn't know, so they can't possibly take out the right amount. Even *I* can't, since to some degree it depends on future things.

[daveon.livejournal.com]

My working assumption there is you only have the one means of income. So the tax you pay on your primary job is always(*) right. If you have other income then you need to do a separate tax return.

However, for the vast majority of people they don't have any more work to do and they aren't left with an under or over pay at the end of the year.

(*) This isn't always the case, but for the majority it is.

[dd-b.livejournal.com]

I haven't had only a single stream of income since before I went to college. But even if I did, there's still the question of mortgage interest for anybody who owns a house, and charitable contributions (such as the money I spend going to SF conventions I'm volunteering heavily at), and income from investments and interest on bank accounts and such. I probably have friends who don't have *any* of those things, but I'm not sure I know who they are.

Furthermore, if you're married, the chances of having only one income stream go down considerably lower.

[daveon.livejournal.com]

The UK system for handling mortgage interest, before they got rid of that due to the distorting effect on the housing market, was it was deducted at source (MIRAS - Mortgage Interest Relief At Source), so it never appeared in your mortgage payments.

Couples also don't matter because income is all taxed individually.

You can apply for a tax code if you have additional charges (i.e. kids) but again, the code you're issued is plugged into the payroll system and the tax paid accordingly.

You don't get relief on charity or other such items and if you do have investment income then you'll sort those out yourself on your tax return.

For the majority of conventionally employed people it _just_ happens. Nor do we have the annual accountant subsidisation fest you seem to have here.

[dd-b.livejournal.com]

I'd be one of the first in line to agree that the US system puts heavy burdens on many individuals in record-keeping and form-filling.

Then again, I did my taxes myself until it reached the point where I had issues like depreciation of a house I was renting part of out to deal with. Never got back to doing it myself after that (and things haven't gotten simpler; the depreciation rules I took advantage of went away, but Pamela and I both generally have non-wage income).

I believe most people here can use the form 1040EZ, the short form; it didn't exist when I started paying taxes, but I couldn't have used it even then if I had. And I filled out the long form myself through highschool and college. Lots of people pay to have their taxes done professionally because they're scared or lazy or something; not because it's actually hard for people with just a house and W-2 (wage) income (or even easier if no house).

[daveon.livejournal.com]

Well, we pay and are likely to keep on paying because of the complexities of our situation. There's a UK return, plus the rental income in the UK which has to be declared there and in the US, there's share income and a bunch of other things - but we're an exception rather than a rule.

Even with simplified systems, I'd be tempted to suggest that the new president takes something more orthopedic to your tax system than a scalpel.

The idea of most people having to do a formal tax return and having deductions for so many things seems more like a job creation system for the IRS and associated accountants than an actual revenue collection system.

I have some sympathy with the idea of a flat tax, but I suspect flat tax fans wouldn't like my position on where it would kick in and how much it would be.

[mjlayman.livejournal.com]

The money you spend going to SF cons you're volunteering heavily at doesn't qualify as a charitable contribution, even if they're a legal non-profit. Volunteer work, and any incidental money you spend to do it, is never deductible.

[dd-b.livejournal.com]

That's not what professional preparers have told me, and I've never had it challenged.

[mjlayman.livejournal.com]

I'll have to look it up, then. I used to have my charitable contributions challenged all the time because they thought I gave too much. Now I can't give much but have large medical deductions and they don't challenge.

[orangemike.livejournal.com]

The U.S. income-tax deduction tables are incredibly simplified. Almost everybody ends up with money due back or (occasionally) owing; and a lot of Americans use it as a sort of forced-savings plan.

Then when you're like me and may get income from three-six employers in a given year, each using tables which assume that they are your only employer: 'tis a puzzlement. (And I used to be a revenuer!)

[k6rfm.livejournal.com]

Actually only one money market fund, "Reserve Primary", has lost money -- they did too much business with Lehman. The rest managed to hang on and are now insured by the Fed.

I never change leftover foreign cash back to US$, I figure even if the exchange rate happens to go against me it's unlikely to be worse than paying commissions a second time. Also, it's really nice to have enough local money to get out of the airport without having to find an ATM or exchange booth.

[daveon.livejournal.com]

More than one money market fund in fact, we're fighting with Ameriprise over out instant access savings at the moment.

[k6rfm.livejournal.com]

You sure Ameriprise didn't put your money in Prime Reserve? A web search on Ameriprise and Prime Reserve shows a lot of activity. Apparently Ameriprise is trying to get all the money they can out of PR and will then make their clients whole out of their own money.

[daveon.livejournal.com]

It could be, they're being really vague about what happened. Apparently it'll all be sorted in January.

[hal-obrien.livejournal.com]

"Apparently it'll all be sorted in January."

What year? ;)