Saturday, March 20, 2010

Death & Taxes - A Question of Balance

Let's just skip the half of the blog title that deals with death and move right onto taxes, specifically income taxes, achieving a balance with them and getting them filed. I just finished our income tax returns for my wife and me for this this year. It was a bit of a chore since I am not currently at home and since I do not have everything I needed to have completed them right in front of me. I suppose more of a chore for my wife, or I would be willing to bet she feels that way, because I called her about 5 or 6 times to check some things from last year's returns and so on. I had most of the necessary documents in front of me but what I did not have she had to look for, and then decipher for me. Really, it was pretty painless for both of us but I think she was doing something else and my calls were interruptions of whatever was that something else. Anyway - we got it done.

A big help in getting it done was my using an online tax preparation service. I use
TaxAct Online. I do not know how they compare to others such as Turbo Tax or H&R Block but I can say they make it pretty easy. That is they make it easy at least for us if only because we do not have a lot of deductions or credits and no investment incomes or other things that require special attention, not yet anyway. I dread seeing what happens after I retire. All in all it took me about 2 hours (give or take). Our tax returns have been electronically submitted to the IRS and to NY State. I should be receiving confirmations from them within 24 to 48 hours. With any luck a refund from each should be deposited to our checking account within a couple of weeks. It was fairly painless and only cost $17.95 to electronically file both federal and state returns.

Speaking of refunds, it seems I cannot strike a balance with my income taxes each year. I would like to have it work out that I owe nothing and the state and federal governments owe me nothing. Now, I realize that such would be a fine tuned balance indeed but in reality I would like to come close to that. With our state taxes this was about right both this and last year. Last year we owed $29.00 to the state. Not bad at all. This year they owe us $75.00, again not bad at all - I don't mind them having what amounts to about $1.44 per week too much from my withholding. Our state taxes seem to be getting paid in just about the perfect amount in deductions as the year goes by. Our federal taxes are a different story. Last year we owed. I cannot recall how much but think it was at least a few to several hundred dollars. This year they owe us several hundred dollars, about $750 or so. That works out to about $29 too much being withheld every two weeks (my wife and I are paid biweekly). We made changes in withholding to make sure that enough federal tax would be withheld in 2009 because too little was withheld in 2008; I guess we overestimated and they got too much in 2009. I do not mind a refund but I hate letting the government have more of my money than they are supposed to have when it could have been in my own pocket getting spent on something or going into a savings account and earning interest. I don't know about you but for me $29 every two weeks can translate to drinking money for a week, money for ammo for a range day (well surely not a whole lot of ammo), or maybe for a meal for me and the wife at a local pub or restaurant once per month. It would have been better had they owed us only a few dollars as opposed to several hundred because I could have used the money as the year progressed.

I am not upset about it though, a refund coming as a lump sum will get applied to one good use or another all at once and that makes it okay. Still though, the feeling that the government had several hundred of our dollars, and still has it, and has used it however they wanted to without paying us interest, is disheartening - especially when you consider the current administration holds the purse strings. Oh well, one way to solve that will be to use the refund on a feel good purchase for Linda and me. Maybe I will put it toward a vacation. That would be nice. The thing is though, I need to figure out how to get my withholding balanced with what I will actually owe to the state and to the IRS. With my small raise this year, and with new tax laws, and with fewer deductions than in the past, and with this or that or another thing that comes up related to taxes, I just don't know how to accomplish that. Any suggestions on how to foresee how much I will owe and how much I should have them withholding??? I was thinking of a Ouija Board or Tarot cards but decided maybe I would use the
Magic 8 Ball instead of either of the others Yeah, I know, the Magic 8 Ball only gives answers to questions that can be answered by a yes or now answer but I figured it was worth a try so I asked it this:

"Is it possible to balance my income tax withholding with what I will actually owe in income taxes next year?"

Here is its answer to me: "Definitely".

Now I wish someone could tell me how to make it so!

All the best,
Glenn B

References: I could give you a link to the IRS since this rant was about taxes but I will leave that to the tax professionals and do you one better. I will give you a reference or three about the Magic 8 Ball and maybe that way you can get your taxes done better than ever before - who knows! (If you actually depend on the Magic 8 Ball to do your taxes you are loonier than I.)