Note to Marketers RE: all tax refund related promos

@MrMark Most people are not disciplined enough to save to pay for their taxes at the end of the year. So if the IRS didn't collect it with every paycheck, when it came time to pay on April 15th, they wouldn't have the money to pay it.

@cengland0 Hell some that don't put the correct deductions (multiple jobs or just saying that you have 30 exemptions to have nothing withheld) can't pay their taxes. I had an issue with one of my employers one year where I had 3 jobs at once. They refused to change my withholding to 0 defendants and $5 extra to VT and $5 extra to Fed each pay period... They refused until I showed them they HAD to comply. They were pretty quick at changing it then.

@sohmageek I am involved in a lot of business ventures as well as investments so I claim 0 dependents and have them take out $20 extra per pay period. I still had to pay more at the end of this year. If I didn't have capital losses that carried over from last year, I would have had to pay thousands more.

Even if I have the money to pay, I have to be careful because if I have to pay too much, I will have a penalty. That happened to me once and then I have to make quarterly payments to avoid that penalty in the future. PITA.

@cengland0 Yes that can be a big PITA

@MrMark That's kind of a minor point. I shouldn't have mentioned the loan thing. The point is it is your own money.

But if you'd like to give me an interest free loan of $2,600 from your bank acct for a year, please let me know.

@MrMark on the withholding aspect, most people have pretty stable incomes and IRS rules allow for a fudge factor. If you're getting a $2,600 refund it wouldn't be that hard to fine tune your withholding to bring that amount down.

And folks with upredictable incomes or those folks self-employeed are likely making quarterly estimated payments based upon the quarter.

@cengland0 I'm in the same boat. I claim 0, and have an extra $30 taken out of every check. I have income that doesn't get taxed, and 100% of that income goes into a savings account until taxes on it are paid at the end of the year.

@RedOak I strive for the $0 refund, however I don't think it is something everyone should do. Many of people use it as a "forced savings" which I think is good for them. It's showing responsibility knowing they aren't responsible enough to save it themselves (hopefully this statement doesn't offend anyone).

@lichme It's the income that should be taxed but was not withheld that gets me.

@RedOak it is not your money. You owe them that money and it may be difficult to estimate it exactly so many people end up paying a little too much and get a refund. If you estimated it where you owe too much at the end of the year, you have a penalty for not paying enough quarterly. The tax law specifies that it is “Pay as you go” and not pay at the end of the year.

So imagine this scenario. You have a steady income and are withholding your fair share of taxes and then in December, you did some work on the side and earned an extra $50,000 that wasn’t withheld. Guess what happens now. You will owe too much money and you should have known you were going to earn that money in the beginning of the year and start paying part of the taxes every quarter. The IRS doesn’t care when you got it and if you owe less than $1,000 or paid at least 90% of your taxes throughout the year, the IRS doesn’t care about that either. If you pay at least the same amount of taxes you paid in the previous year, you’re okay even if you underpaid in the following year. But that $50,000 extra could put you over those thresholds and then you pay the penalty using form 2210 http://www.irs.gov/pub/irs-pdf/f2210.pdf

I’m not the tax expert but I did have to pay that penalty once and have learned my lesson. I believe you pay a factor of .01995 of the underpayment. So on 50K, if your tax bracket is 28%, you underpaid $14K and the penalty is $279.93. So not only would you owe that $14K, you would owe an additional $279.93. I would challenge you to find a checking account that would pay you 2% annually to make it worth keeping that money and paying it at the end of the year.

@cengland0 For what it is worth, my credit union pays 3% on checking balance up to $15,000 balance.

@cengland0 That's what I meant, I have income that doesn't get taxes withheld on it, but I make sure to hold all of it in savings until end of year.

@MrMark I'm interested to know what credit union that is because bankrate.com shows the highest checking account rate is .65% APY (Note that is APY, not APR). The APR is actually less.

@cengland0 Lake Michigan Credit Union. There are stipulations. Direct Deposit, Estatement, Login in a few times a month online, and use debit card 10 times a month.

@MrMark Well, I would be excluded. I do not use my debit card at all except to make ATM deposits. I use my credit card to get points instead and better dispute rights. You need to make a minimum of 10 debit card purchases every month, have direct deposit, login to their site a minimum of 4 times a month, and receive eStatements and eNotices. The rate is also subject to change whenever they want to.

But I must say, that is a good rate. If they didn't cap it out at $15,000, I would transfer a lot of money into their account but for about $450 a year, it isn't worth the hassle of making 120 purchases and 48 logins at specific times throughout the year and then to have a direct deposit too.

@cengland0 Yea the debit card purchases is the hardest one to meet. It was a bit of an adjustment to use debit card on certain things instead of always the reward credit card. I have issues with checking accounts (for some reason I do it almost daily), so it's not hard for me to meet the log-in rate. I don't see the rate changing it's been like this for a number of years. If they weren't a local I probably wouldn't do it, but their service is top notch, so for me this is worth it. The capping at $15,000 is a bummer though.

@cengland0 we agree on one thing. You're not a tax expert. Your claim that "it is not your money" is patently false. 100% of your refund is money that you previously overpaid and it is refunded to you exactly because it is your money.

Regarding people with unpredictable income that is not paid by a withholding business, they are already likely making quarterly estimated payments.

@RedOak No need for an ad hominem attack here. But to be clear, I was referring to the taxes that you do owe is not your money. Obviously anything you paid in excessive of what you should have is yours but that's not the portion I was referring.

@cengland0 the top post was clear: "refund". As was the reply to the top post to which you replied, "refund".

@RedOak My message said this exactly, "it is not your money. You owe them that money and it may be difficult to estimate it exactly so many people end up paying a little too much and get a refund" That seems clear that the portion I was referring to that is not your money is the part that you owe and not the refund portion. Sorry if you misinterpreted that and I don't mean to start an argument so this is my last message regarding this.

@cengland0 Only exception I've found so far... if the power bill that normally has green text comes with say red text... it's usually a disconnect notice and usually has open immediately on the outside or in the address label box. Don't ignore them... Let's just say in my much younger years when it came to paying bills or buying food... Well I got to see what they look like.

@sohmageek It was in those same years I sharpened my "creative ramen preparation" skills. ;-)

@cengland0 Concert tickets too

@cengland0 I feel safe binning everything sent bulk rate.

@nadroj I think most of my credit card statements, checking and savings statements, and many other important documents are sent bulk rate. Very rarely does a company send anything at the regular 49 cent rate.

@PurplePawprints Same here. I try to file taxes as soon as I have all of the necessary paperwork. If nothing else, it upsets the crooks who steal SSNs so they can file the forms first and get other people's refunds. Not that they would get much from me because I try to keep the pay/refund as close to zero as possible.

@rockblossom If they are scamming, why are you assuming they file a correct accurate statement? They probably inflate the deductions like crazy and take the refund.

@SIMBM Here's some more info on what the tax crooks do: http://krebsonsecurity.com/2015/03/tax-fraud-advice-straight-from-the-scammers/

@sohmageek Just a guess but could it be due to the store having to pay credit card fees and that's why they charge for cash back but paying by a check you can get a discount?

@cengland0 No up here in Vt about 8 yrs ago I had worked at a grocery store, and they had a promotion if you cashed a tax check (which they couldn't take their normal $2 check cashing fee from) get 10% off order coupon. They do get charged a fee for the debit and try to recoup part of the fee if you want cash back.

@JonT Woo! He used one of Nina's clips!

@JonT 'doesn't increase my sympathy for the IRS. Nobody forces them to work there.

One thing I agree on tho - efforts to simplify our tax system ("Flat" or "Fair" tax proposals) have not yet gained traction. If more disfunctionality at the IRS is what it takes to kick the log-jam free, 'lets have it.

I'm not against the govt being funded. But that we spend so obscene amounts of money and resources (private and public) collecing taxes is completely insane.

@RedOak It's pretty obvious to me that we have very, very different views on this subject but I'll just point out that in the video they mention that for every $1 spent on funding the IRS they generate $6. It's probably the most efficient government funding we have.

@JonT another very efficient is immigrants. Not the illegals but the ones that go through the proper channels. But yes irs does more than immigration.

@JonT You might have missed my point. Hiring more IRS cops might be a great way to force more compliance.

But our current tax system is a horribly inefficient way to fund govt. I don't recall the exact stats but believe we spend something like 20 cents for every dollar of revenue brought in. That is inexcusable and simply another form of crony capitalism funding lawyers and CPAs. We must simplify the way we collect money to fund our govt - we're going broke with the current system.

@JonT I see that the word "funding" might be the source of confusion. Put another way, yes we could spend another dollar to collect 6 more. But why not instead simplify the tax system to the point where the IRS is a tiny entity and tax lawyers and tax accountants find more productive lines of work. And we can spend our lives doing fun things rather than complying with a crazy complex tax code.

@RedOak @JonT You would think that pretty much EVERYONE in this country who pays income taxes would be supportive of simplifying the tax code; but I just found out this week that one of our state's very own (long-time, senior) Senators has received the most money from tax-preparation lobbyists (for companies like H&R Block) to vote AGAINST any legislation that would simplify the income tax code. This particular Senator of ours has never been a favorite of mine, but upon hearing this about him I was LIVID. As best I can tell, there really isn't any downside to simplifying the income tax system. But this hemorrhagic booger-face of a Senator has been torpedoing any efforts to make his OWN CONSTITUENTS' lives easier just so he can pad his re-election coffers with money from these scum-sucking tax preparation firm lobbyists.

So fucking mad.

@pepsiwine @Redoak @jont Intuit's actively worked against a system called "return-free filing", where your return would be sent to you pre-filled out, and you'd check it over, make any changes needed, and send it back. Other countries already use this system, and the idea isn't a new one here. See the story here: How the maker of TurboTax fought free, simple tax filing