You got back how much?

In today's Express, there is a little blurb that states that 47 million tax returns have been filed so far this year, 38 million of them filed electronically. The shocking part of the blurb? The average refund was $2708! That is an amazing amount of money to be overpaying in taxes. Of course, I'm sure the refunds are in large part due to various deductions, but I was delighted to find out that I was getting nearly $500 back (to counter the nearly $800 I paid to two states).


I know that a lot of people like the idea of a refund, but personally, I'd rather have to pay the government at tax time. Ideally, I'd break even (which I feel I got very close to this year). But I would prefer to have the money when I earned it to do with it what I want, rather than get it back later and have given the government that large of an interest free loan.


Just my opinion though, and I know there are strong proponents of large refunds. I bet it is fun to find that amount direct deposited in your account one morning.

Death and Taxes

I finished my tax returns last night. I ended up using TurboTax, and it definitely made the process simple. I'll probably use it again next year, even though I anticipate that next year, my return will be even easier, with only having to file one state return instead of two. I plan to efile, just to be done with it, even though there is an additional fee to efile.

I was delighted with how my federal tax return played out. Moving across the country for a new job meant a huge deduction, and I am getting a nice chunk of cash back from the federal government.

Then I did my two state returns.

And I owe both states a not so nice chunk of cash. More than the federal return, in fact.

I can't say that this is entirely unexpected. I have investment income from mutual funds, as well as interest income. Even though I may reinvest the interest and dividends on the mutual funds and never actually see the money, it is still income, so I shouldn't be surprised that I have to pay all these additional taxes.

Seeing those numbers made me cringe. I've been working so hard to really tighten my budget and be able to put more money into my savings. (I tend to "ignore" my investment income - it's there to grow, not to be spent, at least not at this point.) Paying these taxes was going to put a huge dent into my day to day savings account.

And then I realized I was just being silly with all these rules I've set up for myself of what I can and can't spend. I have a money market account tied to my investment accounts where CD interest is dumped. I've mentally earmarked that as my emergency fund, but really, it's got almost 10 months of expenses in it right now. Since it's thanks to investment income that I owe these taxes, why don't I pay the taxes out of the investment income? It's the obvious solution.

I think the lesson here is that sometimes we set up all these financial rules for ourselves in order to keep us on track, and we end up focusing so much on the rules that we miss the big picture.

Tax Season

First off, this week's Carnival of Personal Finance was just posted. I love these carnivals, and Plonkee has included a photo quiz. Definitely worth checking out.

This week, I got my first tax form. Oh joy. Since then, I've been debating what to do about my taxes this year. No, not whether or not to file a return, that's not really an option. Rather, I'm trying to decide if I want to do my taxes myself or if I want to pay someone to do them for me. This year, I have income from two different states and a move across the country for a new job. I've also got some dividend income from investments, but I didn't sell any investments this year, so that does make things easier.

Last year, my taxes were a giant hassle, so I ended up paying a tax professional, because I filed them myself, then got a very late form from one of my banks that I was not aware I was getting. (Let this be a lesson to everyone - be aware of every form you should receive and also be aware of the deadlines by which they have to be sent to you - while a lot of forms have to be sent by January 31st, some can be sent as late as March). I had to file an amended return, so I opted to pay a tax professional to help me with this process.

While I have no complaints about the end result, I feel as though I'm in the process of really taking control of my finances, and to continue that, I should do my own tax returns. If I do them on my own, however, I think I want to get a computer program to assist. I've been looking at TurboTax, but I can't decide which version I need. I do have investments, which leads me to believe that I need the Premier version, but on the other hand, I only have dividend income from those investments. Since I didn't sell any investments, maybe the Deluxe version would work just fine. And the difference is $30 (priced at Amazon).

Plus, if I'm paying $70 for a program to help me with my taxes, how much more would it cost me to have a professional do it? Additionally, I think the price only includes one state - will I actually need to download for the other state (I earned very little there), or will I be able to do it on my own?

I think I need to ask more questions and do more research before I make a final decision.