Thursday, April 17, 2008

Taxes - What I learned

So, I know I posted a couple entries ago about how I already completed my taxes. Well, that's the first thing I learned.

Always wait until the last day to file your taxes because you never know when your dad will call you up saying that he found one of your tax forms that got delivered to your old permanent address.

Thankfully, I had waited a long time and hadn't actually sent anything off yet. The form in question was a 1099-INT from Bank of America. It took me a minute to realize that my 0% interest checking account did indeed process interest (as opposed to earning it) when I cashed in a bunch of savings bonds my grandfather bought for me in the 80s. In case you were curious, I used it to help pay for the down payment on my house. Anyway, the new final tally (and I really hope it is final, since I sent them off): I owe $3015 to the federal government, and $1416 to Missouri, but get $1117 back from Kansas.

As a side note, the above situation wouldn't have happened if the IRS prepared your taxes and sent the completed forms for you to verify or add addendum forms to.

I also reasoned out a couple of things that always struck me as ridiculously unfair. First, I figured out why state refunds can sometimes be taxed as income the following year. When you itemize your deductions, one of those deductions is the taxes withheld during the year. So, effectively, that refunded money was held by the government for a year, deferring taxes owed on it. It had always seemed to be a double tax on that money, but it does work out to be more fair than I had originally figured. Plus, the same logic applies to deductions: the check to Missouri that I wrote on April 15th will be a deduction on my taxes for 2008.

I actually can't remember what the second thing I reasoned out was. Instead, I'll open it up to comments: Does anyone have any interesting tips, information, or anything else they want to say about taxes?

1 comment:

Meghan said...

Taxes are good things. I think more of the money the gov. gets in taxes should go towards community services. That is the socialist in me coming out. I also think that taxes should be individual actions. For example, a movie star who earns millions and goes out partying only to go in and out of rehab should pay a larger amount of taxes than say a movie star earning the same amount who donates time to various charities or even donates money. Basically, someone who gives back to society should get to pay less in taxes. I think firefighters, police officers, teachers, military personel and nurses should get tax discounts.