# American Income Taxes



## Lon (Jan 24, 2016)

I have just finished doing my 2015 Income Taxes On Line via Turbo Tax and will be paying the Fed a little more than $800 USD, and that's OK with me.

I have never understood why so many of my fellow countrymen like the idea of over paying taxes during the year with their with holding of taxes so that they can file for a refund the following year. They use the system as a forced savings account and seem happy to have the government use their money interest free. I have over the years always tried to zero out and for the most part have been able to do it.


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## Underock1 (Jan 24, 2016)

Lon said:


> I have just finished doing my 2015 Income Taxes On Line via Turbo Tax and will be paying the Fed a little more than $800 USD, and that's OK with me.
> 
> I have never understood why so many of my fellow countrymen like the idea of over paying taxes during the year with their with holding of taxes so that they can file for a refund the following year. They use the system as a forced savings account and seem happy to have the government use their money interest free. I have over the years always tried to zero out and for the most part have been able to do it.



That's the way to do it, Lon. I remember people depositing regularly in Christmas clubs at the bank. I may be wrong but I seem to recall that they paid no interest. It never made any sense to me. Do they still have those?


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## QuickSilver (Jan 25, 2016)

I always pay....  so no forced savings for me...  I have to save during the year to pay my taxes..


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## Son_of_Perdition (Jan 25, 2016)

Lon said:


> I have just finished doing my 2015 Income Taxes On Line via Turbo Tax and will be paying the Fed a little more than $800 USD, and that's OK with me.
> 
> I have never understood why so many of my fellow countrymen like the idea of over paying taxes during the year with their with holding of taxes so that they can file for a refund the following year. They use the system as a forced savings account and seem happy to have the government use their money interest free. I have over the years always tried to zero out and for the most part have been able to do it.


I beg to differ, I had the same attitude for many years.  Doing taxes pointing out how much better it is to owe than receive.  I reached a saturation point where I was paying a penalty & fees for that view.  After retirement, my income versus expenses were drastically reversed.  I had a 401K, retirement pension (annuity) & SS.  Our downsizing & move resulted in more savings.  Because of *'my previous poor financial planning'* I found myself mired in debt, coupled that with the big loss in our home sale.  I was able to recover taking out most of my 401K, paying down or off most of the debt.  Some went into savings but here was the kicker, the savings account was paying an embarrassing rate of interest.  Less than a penny on the dollar.  

If you owe both state & federal more than the allowed limit you will pay fees & interest negating any return you could have received from the savings.  I found that my needs in retirement were less than expected, income was more so I adjusted my pension & SS to increase withholding.  We are still able to save $500 monthly in our long term savings, put some away for emergencies & deposit more than $3,500 annually from the returns.  We have built up a nice nest egg for my demise paid off all debt, mortgage free (we do pay space rent), we are not beholding to anyone, haven't had a car payment in 3 years.  I don't worry about the whims of the stock market, real estate market & only address or attack any bleeding from my budget through adjustments to utilities/living expenses. 

We could still travel if desired but our choice of residence is located in the same general area we used to vacation at.  Great weather, low crime, friendly neighbors, less congestion, clear skies, excellent health facilities, no state tax on SS, no sales tax, low property taxes (<$6.00 annually), no bogus auto inspections & lower licensing fees than most other states.  It takes a visit to the local SS office with form in hand & less than 3 minutes on line to change my pension exemptions up or down, so that is a non issue.  I just went from 10% (SS) to 15% for 2016.  My returns are simple & free with only income to report, no deductions, no credit cards, no rewards to declare.  By avoiding other 'shell' games & scams I feel my retirement is becoming stress free.

Something that makes more sense to me would be to invest $20,000 into a high yield stock that's paying a 4% annual dividend.  In Jan of each year withdraw or cash the dividend checks for the $800 earnings file an estimated tax form by the Jan due date.  Wait until April 15th to file your taxes (that way you would have 4 quarters of dividends) thereby owing nothing with no penalty or fees.   Any favorable return from the sale of the stock you hold long enough to be considered a long term invest would put more money in your pocket.


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## Lon (Jan 25, 2016)

Son_of_Perdition said:


> I beg to differ, I had the same attitude for many years.  Doing taxes pointing out how much better it is to owe than receive.  I reached a saturation point where I was paying a penalty & fees for that view.  After retirement, my income versus expenses were drastically reversed.  I had a 401K, retirement pension (annuity) & SS.  Our downsizing & move resulted in more savings.  Because of *'my previous poor financial planning'* I found myself mired in debt, coupled that with the big loss in our home sale.  I was able to recover taking out most of my 401K, paying down or off most of the debt.  Some went into savings but here was the kicker, the savings account was paying an embarrassing rate of interest.  Less than a penny on the dollar.
> 
> If you owe both state & federal more than the allowed limit you will pay fees & interest negating any return you could have received from the savings.  I found that my needs in retirement were less than expected, income was more so I adjusted my pension & SS to increase withholding.  We are still able to save $500 monthly in our long term savings, put some away for emergencies & deposit more than $3,500 annually from the returns.  We have built up a nice nest egg for my demise paid off all debt, mortgage free (we do pay space rent), we are not beholding to anyone, haven't had a car payment in 3 years.  I don't worry about the whims of the stock market, real estate market & only address or attack any bleeding from my budget through adjustments to utilities/living expenses.
> 
> ...



If you had to pay any penalties and fees it was probably because you screwed up on doing your Estimated  Quarterly Taxes. You can't totally ignore paying taxes.


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## Son_of_Perdition (Jan 25, 2016)

Lon said:


> If you had to pay any penalties and fees it was probably because you screwed up on doing your Estimated  Quarterly Taxes. You can't totally ignore paying taxes.


LOL, Screwed up, I'll let that pass.  I admitted I pushed the envelope on filing, getting extensions, making payments for past balances, I was on first name basis with the IRS.  I said I had previously made poor financial choices.  Called 'Blade Runner' by friends living on the edge.  Now that I don't need the money to go dancing, wining & dining the ladies, or live large in luxury trying to impress the neighbors I have the extra money to pay my utilities/living expenses, put some in savings (both long term & emergency) & let the government use a small portion of my money interest free all year long.  I just want what is due me at the end of the year.  You're talking nickels & dimes, cutting checks, filing quarterly reports, creating more unneeded stress & at 80+ years you should be sitting back enjoying the fruits of your investments not squeezing the last nickel.    And it gives me something to look forward too - getting the deposits recorded on my bank account, it don't take much to get me excited.


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## QuickSilver (Jan 25, 2016)

Quarterly taxes?   I have owed the Feds close to $2,000 every year for YEARS...  and I have never once filed quarterly tax returns...  not once.. I pay my couple of thousand every year on April 14th....  never been told it was a problem.


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## Son_of_Perdition (Jan 25, 2016)

QuickSilver said:


> Quarterly taxes?   I have owed the Feds close to $2,000 every year for YEARS...  and I have never once filed quarterly tax returns...  not once.. I pay my couple of thousand every year on April 14th....  never been told it was a problem.


What I was referring to by quarterly reports = (1040ES) estimated tax form for individuals, by law if you owe more than $1,000 at filing your tax program will generate a 1040ES for next years taxes especially if you use TurboTax, TaxAct,,,etc.  You will find 4 one for each quarter already generated for you.  They are filed on the 15th of the month following the end of each quarter.  You will also pay a penalty on the overage of the $1,000 (10%) it's generated by your tax program that is added into your total owed.  Most taxpayers ignore the 1040ES's but if you file and continue to owe more than the $1,000 the IRS may send you a letter requesting that you file them.


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## QuickSilver (Jan 25, 2016)

Never paid estimated tax.. or filed quarterly... and have owed more that $1000..many,  many times..   Nothing has been generated or sent to me..   I have my taxes done by a CPA every year..   So..  not sure what you are paying or filing.


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## Son_of_Perdition (Jan 25, 2016)

Look at line 79 on your 2015 return.  There should be an entry if you owed more than $1,000.  Unless you filed for an exemption.

It's hard to break old habits, I find myself drawn into these circular discussions that have no resolution.  I reach a point where I have to accept the fact that if you've read it on the internet, it doesn't mean it is true.  I have reached that point with this thread.


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## QuickSilver (Jan 26, 2016)

Nope...  no exemption..  I just have never paid quarterly estimated..  not ever.. and it's been years...  I've had several CPA's do my taxes and it's never come up.. even the year I had to pay $25,000  in capital gain...


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