4 ms·

> Most people try to minimize taxes. I don’t think this is true. Most people pay more in taxes, and receive the pleasure of a refund check come April.

bentley 2y ago
Even these people try to minimize their taxes so the refund is larger.
- relaxing 2y ago
  By doing what? Letting their tax preparer select the EITC? Calling that a “Try” is stretching it.
  - WalterBright 2y ago
    Contributing to an IRA or HSA.
    - relaxing 2y ago
      Most people do not do those things. And if they do, they’re likely not doing it with tax reasons in mind.
hunter2_ 2y ago
I think "minimize taxes" is short for "minimize tax liability" and refunds due to overpayment have absolutely nothing to do with that once you've paid enough to avoid penalties and interest (which is only ~90% of your liability).
- relaxing 2y ago
  My point is they’re not doing any sort of planning to minimize their liability. They’re not doing sound tax planning of any sort.
  - hunter2_ 2y ago
    Ah, ok. It sounded like one or the other (i.e., people who inflate their refund aren't planning well) but personally I find that adding withholding at an amount that often leads to an inflated refund is a good low-effort way of minimizing risk of underpayment penalties (and it eliminates the need to think about estimated payments) for those good years where substantial gains unexpectedly occur. Of course it's like giving a free loan, which isn't great, but it's miniscule relative to the time I get back by thinking less. And I definitely minimize my liability -- loss harvesting, avoid short term gains, etc. -- so I am squarely in both camps.
ThunderSizzle 2y ago
A tax that is refunded isn't really a tax liability, it's an asset making 0% gain or interest, and will be converted to a cash asset within a 18 months or less. Regardless, most people don't like tax, and there's not much they can do about it if they are W-2 wage earners short of opening a side business or maxing out retirement investments (which isn't helpful to someone trying to buy a house before they are 65).

bentley 2y ago

Even these people try to minimize their taxes so the refund is larger.

relaxing 2y ago
By doing what? Letting their tax preparer select the EITC? Calling that a “Try” is stretching it.
- WalterBright 2y ago
  Contributing to an IRA or HSA.
  - relaxing 2y ago
    Most people do not do those things. And if they do, they’re likely not doing it with tax reasons in mind.

hunter2_ 2y ago

I think "minimize taxes" is short for "minimize tax liability" and refunds due to overpayment have absolutely nothing to do with that once you've paid enough to avoid penalties and interest (which is only ~90% of your liability).

relaxing 2y ago
My point is they’re not doing any sort of planning to minimize their liability. They’re not doing sound tax planning of any sort.
- hunter2_ 2y ago
  Ah, ok. It sounded like one or the other (i.e., people who inflate their refund aren't planning well) but personally I find that adding withholding at an amount that often leads to an inflated refund is a good low-effort way of minimizing risk of underpayment penalties (and it eliminates the need to think about estimated payments) for those good years where substantial gains unexpectedly occur. Of course it's like giving a free loan, which isn't great, but it's miniscule relative to the time I get back by thinking less. And I definitely minimize my liability -- loss harvesting, avoid short term gains, etc. -- so I am squarely in both camps.

ThunderSizzle 2y ago

A tax that is refunded isn't really a tax liability, it's an asset making 0% gain or interest, and will be converted to a cash asset within a 18 months or less. Regardless, most people don't like tax, and there's not much they can do about it if they are W-2 wage earners short of opening a side business or maxing out retirement investments (which isn't helpful to someone trying to buy a house before they are 65).