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It 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 acc
by minkzilla 3y ago
It 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 agoYes, I got a 1099-INT from the IRS.
- bombcar 3y agoIn some cases (depending on your tax situation) other forms of bonds (municipal/state) may be better because of how or if they get taxed.
- loeg 3y agoI did not deliberately overpay as an investment strategy :-). Last time I looked, you needed to be in a higher tax bracket than I was to make Muni bonds worth it, in part because my state (WA) does not have income tax. Something like the 35% bracket. And anyway, my investment strategy is not long bonds at this point in my life.