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I think the basic thing about taxes that is least understood is the difference between gross income and taxable income (the latter is the amount that tax bracke
by PopAlongKid 3y ago
I think the basic thing about taxes that is least understood is the difference between gross income and taxable income (the latter is the amount that tax brackets apply to). A close second is the difference between tax liability, and refund/balance due on the tax return.
- sgerenser 3y agoJust try to convince the average person that “getting a big refund” is a bad thing, since it means you gave the U.S. government an interest free loan.
- rvnx 3y ago(Not from the US) Why is it a good thing to lend for free to the US gov ? Because the regional banks aren’t that stable ?
- tomoyoirl 3y ago“Look! I filed my taxes and I got money back! Yay money!” (Could have had that money all along.)
- dylan604 3y agoThe people that enjoy a tax refund would not really even notice the small amount they "could have had all along" by adjusting their withholding amounts.
- LegitShady 3y agoNah, because for people with poor financial skills, the ability to save is very difficult (even if they had the "Extra" money in their account each pay period instead of paying extra taxes). So even though you're technically getting your money "back", for some people they would not have been successful to 'save' so much without it being forced on them.
- minkzilla 3y agoIt is not a good thing because it is interest free and inflation exists. If you would have had that money earlier you could have put it in high yield saving account or payed down debt.
- loeg 3y agoIt is not interest free. E.g., I was paid $480 in interest on overpayments last year.
- dmoy 3y agoIt is interest free if the IRS pays you within N days of you filing. If they're slower, then they pay interest. Where N is some value between like .... 30 and 90? I forget.
- loeg 3y agoThere are a number of different overpayment interest regimes[1]. Mine was paid based on time elapsed from the time of overpayment (overpaid quarterly estimated taxes). [1]: https://www.irs.gov/payments/interest#pay https://www.irs.gov/payments/interest#pay
- bombcar 3y agoYou pay tax on those overpayments. But they only pay that if they don’t return it that year (for normal W-2 employees).
- loeg 3y agoPeople like getting the big lump sum and some don't even realize it was their money all along that they just overpaid throughout the year. It's not a good thing for individuals to overpay.
- MenhirMike 3y agoOh yes, that's another fun one! Your yearly tax return should be as close to 0 as possible, otherwise you're either over- or under-withholding. Then again, I met some people that use it as a kind of piggy bank because they wouldn't be disciplined enough to save up for bigger purchases otherwise and... well, I can't even, but if it works for them, there are worse things to spend money on.
- demondemidi 3y agoI have income from multiple sources and they are not aware of each other. For example, they will all keep paying social security even when I’ve exceeded the max deduction. It is far too complicated to correct the finance departments of multiple companies. I just reconcile it all at the end of the year and get a refund. Got a better strategy I can use?
- positr0n 3y agoIf your separate income streams are pretty predictable and so is the overwitholding, and if you care enough: you can put a negative number in the "extra witholding" box on your W-4. I wouldn't say this is a better strategy, but you can definitely min/max this even if your income is not stable by extrapolating out your expected income and expected witholding a few times a year and adjusting your W-4 based on your calculations.
- lupire 3y agoWow I wouldn't trust that. I'd add extra exemptions plus a positive withholding if needed.
- dcow 3y agoWoah, it’s okay to have different tax situations. I started a business one year and got a pretty big refund. But we’re not out there bragging about how we get big refunds every year like it’s some goal to aim for and accomplishment to be proud of if achieved. That’s the mentality people are criticizing.
- 3y ago
- datavirtue 3y agoThe average person is a financial train wreck of dumpster fires.
- phonon 3y agoThat's not how the Earned Income Tax Credit works....
- anonymouskimmer 3y agoI never understood why people think that giving an interest free loan to our government is a bad thing.
- YZF 3y agoTry convincing a tech person that the shares they get as compensation from their employer are equal to getting money and buying those shares at the time they get them. I also think tech workers tend to over-estimate what "average person" really is because they mostly know "above average people".
- sgerenser 3y agoYes, this is another example of irrational money behavior that is common in the tech world. According to a poll on our company slack, only about 50% of the employees plan to sell any of their RSUs and maybe 15% sell all.