It’s that time of year again.  Time for the cold to back away, and the warmth of spring to start to emerge.  Time for green things to appear in your yard again.  Time for birds to start singing, and little baby bunnies to start hopping through your yard.  Time for everything to be right in the world, and growing.

Time for you to sit down at a keyboard and ram your head repeatedly into the desk as you struggle to understand a language denser and more full of misery than an Aramaic version of the story of Job.  Time for your to scramble to remember in intimate financial detail things that have at this point happened more than a year ago.  Time for you to learn to fine art of coercing something more obstinate than an ox on Valium to do what you want.



Having only one W2 to slog through this year, and having a company that gets them to me quickly, I had the distinct joy of getting to dance with the devil hiding in the details.  If you had the Marquis D’Sade sit down and design a system specifically to induce misery, he would just sit back and say “Screw it, I will just use the US tax code.  Everything else I do will just pale in comparison”.

For example.  I use TaxCut software to file.  Which I have to say, works great.  I have no issues with the program at all.  At the end, it allows me to electronically file both the federal and state return, of course.  So I file them both.  Yesterday I get a message saying the state of Arizona rejected my return, so I log in to see why.  The state rejected it because the feds hadn’t accepted it yet.  Really!?  Why must this process be so painful?


I do my best to keep any kind of politics out of my blog, since I think the political mind just divides us and offers us an illusion of choice.  If you wanna know, I am a Libertarian, which means I disagree with everyone.  That’s not my point here, so don’t worry about it.  I work with people generally under the age of 25, so they don’t know what they are talking about yet.  My mission is to fill the skulls of mush with wisdom.  There are just a few things that repeatedly come up at this time of year, that I here so often, and I feel the need to explode a few myths.

It’s a refund, not magic free money:

This is my absolute biggest pet peeve.  I see it in both friends, and customers, and every time it makes me cringe just a little bit.  They rush around to get their taxes filed, so they can get a huge refund back.  Then, even if under normal circumstances they would be wise with money, they run out and blow it on something stupid.

A tax refund is not like winning the lottery.  It’s YOUR money, you just convinced them to give some back to you.  If you had done your withholding correctly, you would have had that money all along.  For example, a friend got back $2400 combined from feds and state, and she was talking about going on vacation with it.

This is someone who consistently complains about being broke.  If she would just fill out her withholding correctly, she would have $200 more a month to work with.  How much of a difference would that make?  The money you get, by and large, comes from your own pocket.  If you get a refund, you just used a 0% savings account to store it for you.  It’s not a good thing, you got screwed.

Deducting something you shouldn’t spend, isn’t a good plan:

A deduction is also not magic.  A deduction means you spent money on SOMETHING, and the government lets you save your tax rate on it.  So if you spend a dollar on something deductible, and your tax rate is 15%, you save 15 cents.  If that thing isn’t a wise purchase, your deduction isn’t making your money.

Another example time.  One of my guys at work was talking of buying a house because he could get a mortgage deduction on his interest.  He is a good guy, and a hard worker, but he works for me part time.  He can’t afford a house.  His plan was to send the bank about $400 in interest each month, so he could save $60 (15% of $400).  He seemed somewhat taken aback when I offered to just pay him $100 if he sent me $400 and he kept renting.

Not having the write the IRS a check, doesn’t mean you don’t pay taxes:

I have heard the statement, I got some money back, so I don’t pay any taxes.  Do you have a job?  Yes.  Do you get paid by that job?  Yes.  Then you pay taxes on your income.  Look on your check, those 5 little lines that make your total smaller, those are taxes.  Even if you get your federal and state income tax back, you still pay SS and Medicare.

See the IRS is brilliant.  They knew the best way to make this OK, was to hide the taxes.  If people had to write a big check every April 15th, people might question what was going on.  So they not only authorized federal withholding of taxes, but they made it mandatory.  You actually pay a fine if you don’t allow them to withhold your money.  Even if you pay it in full on time in April, you pay a fine for not letting them hold your money.  Why is that do you think?  Maybe because they don’t want people to see the process, and ask questions.  If they could make the shift from, I am paying my taxes, to, maybe I got a big refund so I can go on vacation, they would win the game.  But that would never work right?  Crap.