07 April 2008

Income tax gaming

An income tax refund means that the government has been using your money throughout the year - and the bigger the refund, the more of your money they've been using instead of you. It's more fiscally optimal to owe, as that means you've been using the government's money throughout the year (gathering interest if nothing else).

Refunds are best received as early as possible - like in January. Owed money, on the other hand, should be filed as late as possible without actually passing the deadline. I tend to mail mine in a week before April 15.

On a personal finances front: budget for money owed months in advance, but don't put tax refund money into any budgets until it has actually arrived.


Tom said...

That's good advice. Now if only I could follow it. :)

Anne C. said...

I figure loss of some interest is a good trade off for a federally run savings program. I would probably not be disciplined enough to save that money.

MWT said...

Hmmm... there are more advantageous ways to make your money completely inaccessible than to let the government hold it. You could just have it taken out of your paycheck and deposited somewhere where you can't get it back out easily.