📈 Don't Get a Tax Refund
It’s tax season.
Ugh.
The only upside is getting that sweet, sweet tax refund check, amirite?
At least, that’s the line the tax prep companies like H&R Block, TurboTax, and others feed consumers in peppy ads that start running as soon as the calendar turns to February (since that’s when W2s are sent out).
Those condescending bast*rds even used Ted Lasso to try and convince you that you could magically get more money using their premium “TurboTax Live” services to file taxes.
TurboTax Live 2022 Super Bowl Commercial “Matchmaker” (Official TV Ad :45)
Here’s the thing: you should be actively trying to minimize your refund each year. Optimally, you get almost nothing back or even pay a little.
Here’s why: there’s nothing mysterious about your refund. It’s simple arithmetic. Take the amount of Federal income tax owed less the amount of Federal income tax paid. If you paid more than you owe, you get a refund. That’s it.
Accountants aren’t magicians, and the government doesn’t pay you a nice fat refund to start the year from the goodness of their heart. In fact, if you received a refund you are giving them an interest-free loan for the last year because that money was yours all along!
Given how high inflation has been, this becomes even more relevant. You gave the government some money last year and they gave it back to you this year when it was suddenly worth about ~7% less.
“But how can you possibly know what I’ll owe in taxes?!”
Let’s assume you work a traditional 9-5 (WFH people imagine this is still a thing) and receive a traditional paycheck. Maybe you own a home, maybe you have some kids, or maybe you just live alone with too many TVs (I’m okay Mom don’t worry). Regardless of your living situation, you at some point filled out a W4 to tell your employer how much taxes to withhold from your paycheck.
The best way to have a tax return closer to $0 is to complete the W4 form correctly. Luckily, there are a lot of online resources to help with this along with tax software and accountants to assist.
Now if you still aren’t sold, know that you are not alone in this. Let’s look at some stats from TurboTax regarding returns.
The average filer got nearly $3k in return or $250/month. This could have been invested in a 401k or traditional IRA (Roth IRA if you have maxed these) throughout the year to further reduce your taxes. Coincidentally it takes even less than this amount to invest monthly and become a millionaire if you start early.
What’s the Upside?
Taxes may suck but think of them as a subscription to live in the greatest country on earth (I know healthcare sucks but fighter jets are cool and we have a lot). And, luckily, we have all the information we need to do taxes for free online or at the lowest cost tax prep option.
You only need an accountant if you’re going to itemize deductions, have multiple sources of income, or own a business. Then, since you’re such a mogul, it makes sense to hire an accountant.
Focus less on the big refund you might get and more on denying Uncle Sam his free money. Instead, take that money and invest for your future.
For Your Weekend
Our round-up of essays, podcasts, and streaming shows to check out over your weekend. We cast a wide net so you don’t have to.
Read:
Getaway Driver by Lauren Hough (Texas Highways)
A grandpa’s tall tale sends a Panhandle native back to the scene of the crime
MY GRANDPA HAS ALWAYS dressed like a farmer. He favors overalls or Wranglers strung up by suspenders, pearl-snap shirts, boots, and a short-brim Stetson. When he went to church or dinner, he’d wear what he called his “uptown” suspenders, slimmer and printed with paisley or little flowers. When I was little, he smelled like pipe tobacco, and he’d blow smoke rings for me to slap apart before they floated to the ceiling. That smell has always reminded me of him. There were years I didn’t know him at all—divorce and remarriage, different states and countries. I didn’t know, for example, he was from Texas, not Denver, where he lived in a split-level and ran his own barbershop. I didn’t know, until recently, that he’s always wanted to rob a bank.
Europe’s Sleeping Giant Awakens by Noah Barkin (The Atlantic)
Over the weekend, Merkel’s successor, Olaf Scholz, rose to the podium in the Bundestag and proved otherwise, putting freedom first in a stunning response to Russia’s unprovoked invasion of Ukraine. In doing so, he shattered German foreign-policy taboos dating back to the founding of the Federal Republic more than 70 years ago.
Scholz announced that Germany would end its dependence on Russian gas, spend an additional 100 billion euros on its military, and deliver hundreds of anti-tank weapons and Stinger missiles to Ukraine in order to help its overmatched military counter Russia’s all-out assault. Germany may also be forced to extend the life of its nuclear plants to fill the energy gap created by the halt to Russian gas supplies.
Watch:
Our Flag Means Death (HBO Max)
The newest series from Taika Waititi (‘What We Do in the Shadows’, ‘Thor: Ragnarok’) finds British aristocrat Stede Bennet working through his mid-life crisis by choosing to become a pirate. Except, he’s not a very good pirate. To wit: he stocks his quarters with library shelves full of books, forgetting the pitch and roll of a boat at sea won’t keep them there. If you’re a fan of Waititi’s other work, this one will be for you.