Do you mean that we should pay more taxes or do you mean we should adjust our withholdings so the government does not get interest free loans?

I think Alan meant the former, but the latter is good advice as well.

However you want to pay. Cash, credit card, gold, increased paycheck witholdings, there's all kind of way we can each pay our debt to the US Government. Obama says thanks.

Earners should be paying the tax rates that were used in the 1990's. I was married with two kids. We made under $100,000 total and paid all our bills and took vacations. A 6% mortgage was considered fair.

Then Congress in 2001 gave thousands of perk loopholes to businesses and taxpayers and took us where we are today. In 2008 I was getting more deductions from using the standard deduction than the long form. That was not using the mortgage interest deduction. Now members of Congress are afraid to fix it because private businessmen or tax lobbyist like Norvell Norquest have control of their re-election finance funds. Department of Defense budget in 2001-2004 was under $300 billion a year. Pork barrel add ons were sometimes more than the original cost of the bill passed.

Just because the gov'mint incompetents in Washington overspent on bridges to nowhere, wild goose chases in Iraq, bailouts and hefty tax breaks to the wealthy and foreign aid to countries whose people would just as soon cut our heads off... doesn't mean we should gladly and eagerly make up the difference (I know... you're just being sarcastic)!

There in-lies the problem, Alan. The government has written checks with it's mouth that it's a$$ can't back up.

I think the largest portion is healthcare. Medicare, medicaid, ss, accounts for half or more of what was overspent.

"Then Congress in 2001 gave thousands of perk loopholes to businesses and taxpayers and took us where we are today."

So you really think that happened as recently as 2001?

The real shame is that we American's have a hard time saving money and they use the overpayment of income taxes, gaining no interest, as a way to save. The better thing to do is to reduce your monthly payroll deduction to a point where you just get a minimum back or owe just a little. Especially those living paycheck to paycheck.

They are a 'windfall' because Americans don't know how to fill out their W2 form correctly

Alan, before I will pay one penny more than I am legally obligated to in taxes, the debt drunk a$$holes in both parties in Washington will need to get their collective act together. Stop wasting the people's money, stop spending money we don't have, make meaningful cuts to appropriate programs and THEN we can talk about me contributing to paying off the debt. Doing anything before that is simply enabling debt addicts.

There are so many problems with the way we do our taxes. I would like to see effective lower rates on everyone and no more "doing" taxes at the end of the year. If you make $100k for example you pay 10% of your wages over the year and that's it. You don't get to write off charitable deductions, mortgage rate deduction, get child credits and all of this other non sense. You pay your 10% or whatever the amount is for your bracket and be done with it. You simply pay the tax and no one games the system, finds loopholes, writes this and that off and no more dealing with this complex tax accounting. It's non sense.

The fact that the average return is $2700 is a huge problem. What this article isn't saying is that most of these people are paying no taxes and the government is basically giving them money for nothing. That goes for everyone and everything. This is everyone finding a way to game the system from the bottom earners to the top earners. That's why if we just pay our payroll taxes at lower rates and nobody, not corporations or anyone else, would do taxes at the end of the year. You pay what you pay and that's that.

Before the Special Interest in the Federal government fooled the American people to pass the Income Tax Act of 1913, the Federal government was small; Federal spending was small; Federal deficit was small or non existent; and most importantly the American people were wealthier.

After nearly one hundred years after the passage of the Income Tax Act, the Federal government is the biggest and insolvent; the nation is deeply in debt unable to pay its bills; America relies on the money printing press to pay its daily expense; the debt ceiling had to be raised repeatedly. All these fiasco even though the Biggest Government has increased the income tax multiple times while added other taxes as well.

The evidence is clear. Giving more tax money to the voracious Big government is not the answer. Reducing the size and cost of government is.

The article says, in part, that people should do the following: "If you’re good at sticking to a budget and can pay your bills on time, don’t have expensive credit card debt and have the discipline to use that wisely, this might make sense." Wouldn't it be wonderful if our current administration would take this advice?

Refunds for the poorer segments of society really have nothing to do with withholding. Low income wage earners get earned income credit, which is a refundable credit, meaning they get back more money than what was withheld. Withholding less and putting the money in a bank account will not advantage anyone, because the interest rates on savings accounts are so low that they are practically nonexistant. It is very difficult to do tax planning when congress waits until the end of the year and then makes retroactive tax laws.

I don't have enough money in savings to "earn" any interest, so whether uncle sam holds it for me or the bank holds it for me, is a moot point.

I pay my bills on time, I do not live paycheck to paycheck, and i've paid off $10,000 on the principle of my mortgage in the last 2.5 years.

The refund I get from uncle sam every year goes into my savings account, and some of it goes towards a vacation - if im having a good year financially.

Honestly, I think the people who do live paycheck to paycheck, and are struggling on their bills, and behind on payments would not benefit from reducing their withholdings so they have more every month.

Why?

Because you have to understand how someone ends up living paycheck to paycheck, and the odds are that they suck at putting their money where it NEEDS to go...and will likely just blow that extra money, and be worse off for it because they wont have that windfall come feb where they can truly take that big chunk of money and do something substaintial with it (like pay for something that needs fixing, like a car or home repair).

When you dont have the $1000 it takes, and it feels impossible to save up to that amount...you'll just ignore the repairs that are needed. But when you've suddenly got $1500 in your hand...you can pay for that repair and still have $500 to blow (since thats likely your inclination).

It's not perfect, because humans arent perfect. But it should be viewed like a bonus from work. You dont quite realize how much you "plan" for that bonus, until one year it doesnt come...and you find out just how much that hurts you.

mdsj,

What you propose may sound good in theory but it fails to take into account income that is not subject to withholding. Do we eliminate tax on unearned income? If not, then people and corporations are still going to need to "do their taxes", many with quarterly estimated payments which can result in either under or over payments even with the simplest of tax codes.

alan_static

However you want to pay. Cash, credit card, gold, increased paycheck witholdings, there's all kind of way we can each pay our debt to the US Government. Obama says thanks.

Did Bush say thanks as well? After all, he left us an 11 TRILLION debt... oh wait, my bad.. we are supposed to pretend that didn't happen.

None of us would have to pay higher taxes.. if our govt spent money more responsibility and closed numerous tax loopholes.

I see... so because the government overspends, we should just send all our money to them, and everything will be ok? That's just plain stupid! What a way to create complacency and lack of urgency to cut spending.

LOL @ people thinking they are getting a refund.

Obama has other plans for your money this time.

mdsj,

Please document your assertion.

@hey-mikey - You are correct on that. So "doing taxes" would merely mean taking your unearned income and paying the tax on it. I am over simplifying but that is a much easier to understand tax system than what we have and would stop a lot of the non sense.

I personally know a couple with 3 kids and the husband gets paid under the table. Claims some of the money and then writes off enough to where they only owe about a thousand bucks or so and then they get the child credit in which then they get thousands as a return and they "pay" their small tax obligation and then get a lump some of cash. Hence they have paid no taxes and we gave them money for nothing. It has to stop.

alan_static

However you want to pay. Cash, credit card, gold, increased paycheck witholdings, there's all kind of way we can each pay our debt to the US Government. Obama says thanks

That's not even funny, alan. We don't owe this corrupt government anything!!

Shipwrecked, I thought Alan's post was very funny. With the change, 'Obama says Give me More!!'.

Right on Alan, most cannot take or even comprehend the truth. We are getting infrastructure for almost nothing!!! What kind of business allows you to buy their product and then refund the money back to you? Our Government does, it gives the service but has an electorate that doesn't want to pay for it. Even the so called "earners" who like to feel oh-so put upon! I pay no fed taxes on MY income, just because I own a home and have kids. My divorced mother pays more taxes than I do, go figure....just saying...

“People plan for and look forward to those refunds. It’s critically important to them, especially people living paycheck to paycheck.”

If we were truly planning, then we wouldn't get refunds. We only get refunds because we FAIL to plan.

I am constantly amazed at how many people don't get that this is THEIR money and the only reason they are getting a refund is because they overpaid. Many seem to believe it's some gift from Uncle Sam. I've even had several people (with decent jobs) tell me, "I don't pay any taxes. I actually get money BACK." (and they say this with a straight face).

It makes no sence to put your couple of dollars a week in the BANK you get no interest on it ((unless you count .005 as interest)) meanwhile the BANK uses your money to increase shareholder payments ... you may as well let the Gov use your money.. at least they will put it to good use like paying some congressmans salary

Time for the IRS to "man up" and terminate the BILLIONS of taxpayer dollars given to Illegal Aliens (Immigrants) who use their ITIN to file tax returns claiming the Child Tax Credit for children, NOT THEIRS, living in MEXICO.

And, to prosecute 41 Obama White House staffers, and some aides, along with HUNDREDS of "elite" elected Congressional representatives and HUNDREDS of Government workers WHO HAVE FAILED TO PAY THEIR BACK IRS TAXES.

Wait a minute.....TurboTax Geithner is FOR bypassing Congressional procedures to LIMIT THE NATIONAL DEBT CEILING.

3000.00 is what they overspent just last year. To wipe out our total national debt, each person living in the US (from newborns to centenarians) would have to pay about $50,000.00.

Second point - why anyone would allow the government to borrow their money interest free for a year is beyond me. I have the least amount possible witheld, and gladly write them a check on April 15th (and not a day sooner). In the mean time, it sits in savings and gathers interest. It might not be much in interest, but it is something. It takes no extra time or effort, just a little discipline.

So turbo an online DIY tax service has stats on the details of their customer's lives. So much for privacy poliies. They are data mining personal info from their customers who think their info is being compiled to produce the tax reports the gubmint requires. Uh -oh.

Most people are using that refund to stay afloat for the short time they can. They aren't blowing it on junk stuff like one low informed person said they were. Just have to love those types that spout off and have no proof of what they are trying to project as the truth.

And if perhaps he might be correct, buying those Ipods/pads, junk stuff is helping the economy. But they don't even want people doing that. It seems like they want to see us crash and burn. Must be from the pukebag party.

Paying credit card interest on debt all year, while loaning the IRS money interest free......now there's a great financial strategy.

This article is delusional...people do not do smart things with refunds...They blow it. They go out to eat. They will buy new Ipads.

And what's wrong with that?

Paying credit card interest on debt all year, while loaning the IRS money interest free......now there's a great financial strategy.

No one is doing it for any strategy and you know it. People go with the default withholding and then get what they overpaid back at the end of the year. I know of nobody who thinks they are saving money by sending it to Uncle Sam.

People can up their withholding but they may end of paying April 15th. So either way you pay, who cares if you do it then or peanut butter it over a year to get some of it back.

Of course they blow it Alan - Cuz their Stupid! Look, a certain political party needs to keep a steady flow of victims within our once great nation to ensure they stay in power for the next four years...

My skin crawls when I see those tax preparer commercials with the scumbags dancing around with their gumb'mint checks in their hands.

As a society, We are so behind in the race that we actually think were leading.

Cuz their Stupid!

:)

Interest rate on a 1-year CD is around .25% . Loaning your withholdings to the government for one years is negligible. You can thank the Federal Reverse printing press.

Going out to eat isn't "blowing" it (and $2700 is a helluva meal, btw) - it's recirculating it in the local economy and helping others keep their jobs. I don't hear you complaining about Wall Streeters with their six-figure plus bonus checks this time of year buying high-end cars or whatever. Most folks do a little of everything with it, save some, spend some. They'll park some in their savings account, pay off a bill or two they'd otherwise spend months paying off, and maybe take the kids on a vacation. Big whoop.

Forget withholding - the bigger issue is that wages have not kept up with inflation, low as it is even now, for the last 30 years. My parents raised NINE of us mostly on my Dad's salary (which topped out in 1988 in the low $40s); we all graduated from college thanks to their savings, our savings, work-study, grants and loans. We'd take one family vacation a year. Dad worked his "vacation" time at a seasonal job to pay for school clothes for us. And between them, they left us $30K each - not bad for a man whose job started at $5K a year in 1950 and a Mom who only worked part-time for a few years - her "pension" was a grand $14 a month. Couldn't do the same today, not even close.

Just have to love those types that spout off and have no proof of what they are trying to project as the truth.

Aren't you doing the same thing? You made the opposite claim in your post without any proof. It's always weird when someone criticizes an action by doing the same action themselves.

SallyAnn - Please spare us that people will use it to stay afloat. What did they do with it before the crash? They wasted it. And, at minimum, most will waste their refunds in 2013.

"Helping the economy"? Please, they're now the drain on the economy and epic levels of food stamps and welfare.

I want people to get out of debt and be financially stable so that people don't lose their homes or get off welfare....So that they can live healthy, peaceful lives without worrying where their next meal comes from.

Sounds like you want people to spend until the next inconvenience ruins their lives....I prefer people to be strong so that they can survive when bad things happen.

Paws - I want people to get out of debt and be financially stable too.

Of course, it requires well paying jobs - doesnt it?

But I don't put all the blame on people who've borrowed more than they can afford to pay back, or had no desire in paying back. Or who have lost good paying jobs and cant find any job that paid as much as they used to make, and now all their money goes towards JUST SURVIVING, forget your debts.

No, I put MUCH of the blame on the banks who handed out credit like it was free candy. To people who have proven over and over again they arent going to pay their debts back.

Honestly, I think America needs a GIANT RESET BUTTON - where the banks simply lose out, and americans get a clean slate. And anyone who stops paying on their debts (like say credit card debt) is simply blacklisted from EVER getting credit cards again.

It'll teach the banks not to lend to people who dont intend (or cant) pay it back.

It'll teach people who've racked up debt that the free money train is over, use your own money if you want THINGS.

But it'll also teach our economy a thing or two - and the biggest thing it will teach us is that a service based economy will fail without credit debt holding it up.

When people are spending THEIR OWN money, they tend to be a bit more judicious about how they spend it. Getting the newest IPHONE the minute it comes out, just wont happen as much.

We'll come to realize that if we dont MAKE THINGS, our economy will cease to exist...and manufacturing will come back, CEO wages and Regular Employee wages will balance back out, because if we dont have good paying jobs WE CANT BUY THE CRAP YOU ARE SELLING!

I would personally default on my credit debt in exchange for never being given a line of credit ANYWHERE ever again - but I would pay off my car debt and house debt as I promised to.

If I was freed of my credit debt, I would have an extra $1400 a month.

1/3 towards mortgage/car debt...1/3 into savings...1/3 into the economy.

I guarantee the economy would be better off if most americans had their credit debt wiped clean...JUST the credit debt.

Fewer foreclosures, fewer defaults on car loans...fewer people on foodstamps...fewer people living paycheck to paycheck.

Of course, the banks - but mostly their investors on wall street - will lose out HUGE.

But isnt that the gamble THEY took when they offered the boatload of unsecured debt in the form of PLASTIC?

I plan to 'blow it' by paying off a few things, putting some in savings, and buying a small apartment washing machine (our laundry room charges 3.00 per load!).

inmissouri - That's smart use. More people should be like you.

Jessica - Partly agree. The banks should take the hit for bad loans. The govt messed things up supporting them and changing regs, so they had no incentive to be frugal in their bad loans. Bailouts should never happen. Too big to fail? Nope...Should never be.

However, you are responsible for yourself. Just because a bank will lend you money, you are responsible if you accept it. I completely agree...Don't pay it back, then your credit is done for a long time. Some people are just surviving now through no fault of their own. I feel bad for those people. But, when times were good, pay off your car, pay off your credit cards, & pay off your mortgage. Sadly, when times were good, people had more credit card debt and the least savings in history. Americans set themselves up for failure.

If the public used common sense and quit spending all of their incomes, they would be financially secure. The avg credit card debt is $8K...that's ridiculous. If you can't pay it off each month, then stop using it.

Inmissouri is using his refund wisely and will improve his financial position...$3 at a time. Little changes add up to substantial wealth.

I agree with you on jobs, but the politicians are driving a world economy. Your wages are competing with chinese & Tiawan...You can't win because they have no human rights. But, it's not changing either. You can only control your situation as best you can. Americans need to control their finances.

Unfortunately, I see Americans have not learned anything from the 2008 recession. Americans are doing this to themselves.

If Americans refused to pay $500 for an Ipad (jeans, cell phones, or whatever), you'd see that price drop substantially, but it's supply and demand....They blow their money and act like idiots on the news when they were released. I laughed....Apple sent all their jobs to China and they are buying his overpriced products. Not me.....

Jessica, you could always pay off your debts, and keeping the bills paid on time also prevents you from penalizing fees. You accumulate savings rather quickly when you are not paying interest. (Or fees).

Multiply your mortgage times 12 and again times 30. What is that, 3 or 4 homes? This housing crisis flooded the market with affordable homes that can be purchased outright, costing less than cars.

I set 10% of my income aside, whether I like to or not, as mandatory insurance for my against faulty craftsmanship at work. It kicks back every February, I have to pay income tax, which varies, and keep the rest.

So new guitar amplifiers, or somethings I've always wanted to get involved in like cabinet building and detailed woodworking can be realized. I may get 1 year older but also one step closer.

First you have to get tired of debts, just the obligation itself can become an albatross. Next you have to get desperate and sell most of the things you love and adore to get you free. Then those things come back year by year.

A zero interest year means as much to me as a zero bar-tab year. I tire of wasting money, tired of it long ago.

I think the debt that most people are going to be paying down is the residual debt from Christmas shopping, but the article doesn't get that specific.

It doesn't make sense to go into debt just to pay it down when the tax refund comes. But many people face unexpected expenses and have to use a credit card. These people need to have a savings account so that they don't have to resort to a credit card.

The best answer to that is to start an automatic savings plan at the bank that takes money out of your checking and puts it into savings every month. Out of sight, out of mind. If withholding is set properly, then the money for the savings plan will be there each month. Obviously, the savings has to be treated as an emergency fund, and not as a cookie jar.

I think most low- to moderate-income taxpayers with children are likely getting big refunds because of the Earned Income Credit. This money does not come out of the paycheck, and it really is a windfall for working families. It is one of the best programs to give lower-income people an incentive to keep their jobs (rather than going on public assistance completely).

I wish all banks would go back to options of less than $20 increments. That's the main reason I never use ATM's. There are a few grocery stores and pharmacies that allow whatever amount you want and those are the one's I use, plus no lame fee.

"This article is delusional...people do not do smart things with refunds...They blow it."

Just like the Empty Suit and his ilk!

if you are on commisson or bonuses you cannot control your withholding, a max 35% is required

That is exactly what we do. We buy half beef and half pork.

Stock up the pantry with can goods etc..

Our weekly grocery bill is about 45 bucks for basics like milk eggs cheese cereal.

Yes, I mentioned this in a comment above before I read your post. Earned Income Credit is an excellent program for working families with your level of income. By the way, you have the option of receiving the EIC in your paycheck throughout the year if you wanted to go that way. It depends on which would be more helpful to your family--lump sum once a year, or a little more money every payday.

Here's an idea, let's pay thousands of dollars to individuals who would rather impregnate everyone and play video games. I know too many people who come up with excuse after excuse why they cant work when the fact of the matter is they dont want to and will still get thousands of dollars on a return for the kids they fail at providing for. It is a jackpot for them at the cost of us working class.

Just a slick way of Welfare; i.e. federal govt free welfare money via IRS under the guise of 'tax refund'.... there are several tax credits that are essentially welfare (Earned Income Credit, Child tax credit, Child/dependent care credit, first time homebuyer credit, energy efficiency equipment credit, and on and on.....) A family with income less than $45,000 can get a piece of that welfare (EIC) with 3 children.... or someone with no children and income less than $14,000 can get a piece of that welfare.... It is like an incentive not to make more income.

Taxman2U, only a fool would not want to make more money because of some tax situation. That kind of thinking would indeed be a disincentive to success. And yet, I've had some tax clients who are self-employed worrying about making "too much money." I say, make a fortune and pay the taxes! Be glad that you can! Enjoy your success!

Also, the EIC hits the high point at much lower incomes than you've noted. By the time income hits the numbers you've mentioned, the credit has phased out completely. So who would not want to make $50K a year instead of $45K?

union bro, you've got it wrong. It's called the EARNED income credit because you have to be working to receive it.

Completely agree. I'm willing to pay my fair share even though others don't. I don't understand how people that don't pay anything get thousands back.

Our "owned" politicians won't go for it. Too much money at stake from special interests. Too bad most voters don't recognize this. Career politicians are killing this country. These suckers turn into millionaires very quickly and it is a sham on the US taxpayer!

Taxation through transaction is a unfair burdening on the 98%, as that tax is a higher effective rate and taxes subsistence.

A comsumption tax would not have to tax subsistence or clothing for that matter.

'There you go again', making exceptions and exemptions from the gitgo. Consumption tax approach is fundamentally flawed and overly burdens the lower income quintile(s). With 60% of the total income wholly within the upper quintile, consuption taxation is aristocratic pork.

morbas, I will take it that you didn't bother to go check that site out to see how it was laid out did you? No you didn't because your answers told me so. Until you go and see how it would be implemented (if allowed) then you would know for fact it is viable. Don't speak on a subject that you know nothing of. Your past post is so flawed as to be a joke if you bother go actually READ on it. Then get back to me and tell me how flawed it is.

If you still believe it's flawed, then I will listen to your arguments but until then, your responses are...well...just wrong.

Morbus, consumption taxes have worked elsewhere, the US would be no different.

But the main issue is not revenue, it's spending. You would need to have a 40-45% tax increase on everyone and everything to make the numbers work without spending cuts.

How do you deal with unearned income that is not subject to withholding?

LTC Mikey - Are you asking from a consumption tax perspective? If so, you deal with it because all purchase are taxes (a national sales tax). If you are a drug dealer and don't pay taxes, you would now pay taxes on what you purchase. If you are asking about income that is now not taxable (military retirement possibly), it would matter because we would no longer tax income (cost of production), we would tax consumption.

No Bookem, I was asking about the types of currently taxable income that are not subject to withholding at the time the income is received. One of the premises of the consumption based tax is that we also go with a straight flat income tax with the assumption that it would "eliminate" the whole IRS or most of it since withholding would essentially equal what people or corporations owed. However, that fails to take into account currently taxable income that is not subject to withholding.

BTW, CDR not LTC :-)

The issue with flat taxes are that they are regressive taxes, they do affect the middle and lower classes more so than the upper class. 23% of someone's wages who makes $15,000/yr is going to be a harder burden than someone who makes $100,000/yr. People who are incredibly wealthy have much of what they need and therefore do not spend as much money, hence why it just keeps piling up in the vaults. It may be "fair" in that everyone pays the same %, but it's hardly fair when the less wealthy of society are constantly using the majority of what is left of their paycheck after bills for consumables, it makes it so that they can afford less and less b/c of such a high tax rate comparable to what they make. Also, remember who puts wages in place, it's not the general employees.

Property tax. Your share would be less than you're paying in income taxes now.

annon has good points.

People who advocate a flat tax always seem to be thinking of a low percentage, like 10%, 12%, 15%. Most people are in the 25% bracket or higher, so how do you figure that a low flat-tax percentage is going to bring in enough money? More likely a flat tax will have to be 25% or more. If you are making $24K a year, suddenly you can't live on it. There is a minimum income below which people can't support themselves, which is why a tax bracket system makes more sense.

Increased property tax is not the answer, for the same reasons. It won't be less than what you're paying in income tax. Landlords will pass it on to their renters, and homeowners will be strapped and in danger of losing their homes.

Most people are in the 25% bracket or higher,

How do you figure that they actually pay that? 80% of Americans pay less than 15% income tax. we made 91K and paid 6.13%.

Auto 101, you're talking about "effective tax rate," not tax brackets. What was your taxable income when you made $91K? $91K is your gross.

My guess is that you had a lot of big deductions from your gross income. Please keep in mind that if it's truly a flat tax, then your deductions go out the window. So, even if 10% were practical as a flat tax rate (which it is not), you would be paying $9,100. And, if the rate is 25%--you can do the math.

Exactly jim,

The withholding exemptions are too coarse a tool to accurately set up a situation where the refund/owed amount is in the $100 range. With a good accountant, you might be able to set up exemptions then request $X.XX amount additional be withheld to get close to a perfect balance.

Exactly, rather this is a interest free windfall for the Government. The article has it backwards.

California initiative passed to tax the rich and now has a balanced budget. The upper quintile has a lower federal rate (%20) than everyone else (39.5%). Fiscal cliff fairness has been compromised by the autocratic bureaucracy.

My federal tax rate for 2011 was 6.13% for 91,000.

What? You paid less than Romney did? Say it ain't so, Obama!

morbas - you are full of BS. Where do you get your numbers because it isn't from IRS data?

Auto, I wish I knew how the laws worked, because even though we had enough deductions to bring it down to 15%, we had to pay an Alternative minimum tax to bring it up to over 25% or so.

The Alternative Minimum Tax is a stupid law and should be repealed. If we fixed the tax brackets correctly we wouldn't need such a ridiculous, onerous program.

If they are low income and working, then they should be eligible for Earned Income Credit. This does not come out of the paycheck.

You are correct..... Just a slick way of Welfare; i.e. federal govt free welfare money via IRS under the guise of 'tax refund'.... there are several tax credits that are essentially welfare (Earned Income Credit, Child tax credit, Child/dependent care credit, first time homebuyer credit, energy efficiency equipment credit, and on and on.....) A family with income less than $45,000 can get a piece of that welfare (EIC) with 3 children.... or someone with no children and income less than $14,000 can get a piece of that welfare.... It is like an incentive not to make more income.

I replied to you above. The income numbers you state are the phased-out points for the credits. The high point of the EIC is lower. The credit follows a bell-shaped curve.

EIC and the child-related credits and deductions are a nice reminder each year that yes, it's worth it to keep working, even when half your income gets wiped out with health insurance and child care.

JulieB-I'm self employed,use turbo Tax and have my taxes figured out quarterly to a few bucks.I'd rather owe a few dollars then get any back.People are foolish to loan the government their hard earned money interest free.

JulieB and just a cleaning lady, I'm self-employed also. I have used a spreadsheet of my own for years to track my income and figure out how much my estimated tax payments have to be.

I never know for sure how much I'll make in any quarter, so having the spreadsheet helps me keep my payments in line with income. Often I've overpaid by a little bit, but it all gets credited toward the following year anyway.

True, but unlike a savings account, if you need access to the money you'll need to wait until filing season (plus a few weeks to get the refund).

Still Working,There is something inherently wrong to loan anybody,government included,your money for one year without receiving compensation like interest on that money.If you need to save money put it in a savings account.That little bitty percent is better than zero.

I know that for some people this is the only strategy that works.

Money just burns a hole in their ATM card... so the little bit extra every month gets lost in the shuffle.

Consider an automatic savings plan--and change your withholding to account for it. And of course, don't touch the savings account except in an emergency--a big car repair, a broken refrigerator, etc.--things you might be tempted to put on a credit card.

Which states are those, cedrick?

Usually it's the other way around--IRS taxes state refunds as income. But, that's only if state taxes were deducted as an itemized deduction the year before.

Most of the big companies like HR Block will do simple returns under a certain income level for free, including efiling. They'll try to sell you a package to do your state taxes, but it's not required for filing federal.

Tax act will sell the package for $10.00. I used it for 8 years including on a self employed business. Turbo was wanting $75 or more and book keeping services several hundred and CPA's just below $1,000 (if you have the months to wait for them to get to yours). There is no reason for anyone making under $50,000 to have anyone do their taxes anymore. It is that simple. If a person can spell their name they can do it on-line.

I think you're right, Yank, except that it does depend on the situation. I prepare taxes during the season, and I have had clients whose income was significantly below $50K--but, they had self-employed businesses, rental property, income from family investments, and so on. This is beyond the scope of most free tax prep, and so they do need help from a tax pro.

With banks paying less than 1% on savings accounts and a tax refund is what it takes for some to save, then why not. It's not like the government is getting a huge chunk of interest.

I have an account that pays like .001! Obviously I never put any money in it!

Interest rates are ridiculously low--but that's not the point of savings anyway. Interest on what used to be called "passbook" savings is just a bonus. The real purpose is as backup, so that one doesn't have to put every big expense on a credit card charging 12%, 15%, or higher. That is where the real savings comes in. So, even though my savings is paying less than 1%, I keep making deposits.

A few months ago I bought a new used car and paid cash from savings. So, I'm not making car payments to a dealer. Instead, I figured out how much I need to pay my savings account back to "pay off" the car in 3 years, and am making payments to myself monthly.

This savings didn't just drop out of nowhere--it has taken time to build it up, but it began with putting money aside every month.