While this might be correct, I disagree with this as a philosophy.
A) most people in this country don’t have cash reserves to pay an underpaid tax bill.
B) most people don’t have the investment acumen to properly invest monies not withheld on taxes to benefit from not paying as much on their income.
C) They just spend the money because most Americans live paycheck to paycheck, and because A and B.
So for most people I would say that judicious overpayment of tax on the W4 resulting in a minor or modest tax refund is probably better all-around. That money will go right back into the economy or pay off some debt.
It also shields you from human error, the IRS already knows what your taxable income is (assuming your employer correctly withholds it for you). Its much less stress to file with an error in your favor than in theirs. If you own them they will hunt you to the ends of the earth and make you resolve it, but if they owe you they just send you a check and call it a day.
This assumes tax return is because of over-withholding. If you’re like me with a young family and low-ish income you pay $0 in federal taxes and get a bunch back for EIC, child tax credits, etc. I’m just excited because I’ll be able to fully pay off some of the debts that have been hanging over me and largely not shrinking at all next month
My employer sells “stocks” to employees that don’t show anywhere and you can only sell them back to the company after two year. Exchange also isn’t immediate. Company chooses the date.
They really want people to buy those things and are heavily campaigning for it.
They also give a small amount of these stocks as bonuses to people that have performed well.
When I say to people that buying those “stocks” just gives the company free loan, they look at me weird.
Yes, stock is basically a loan to the company. Sure, if a company always new it was going to grow at a certain rate and life were guaranteed they could give everyone an exact raise…
Instead they say “here is a bonus, its built on a gamble. Here’s is monopoly money that might be worth 10% more in two years, or maybe the company will be bankrupt and you will be unemployed.”
Would it be better to get a cash bonus or a raise of similar value? Sure.
As an accountant I’ve listened to several colleagues talk for hours about dialing in their W-2’s, some even under withholding and making quarterly payments to make up the difference. Calculating exactly what they are saving and investing that into a seperate account.
Probably spending more in fees than they’re saving. Let alone the time invested. I’m perfectly fine with the government slowly accumulating 1% of my income extra over the course of a year and sending it back later personally.
It doesn’t have to be that hard for normal paycheck people. Just set the deductions so you owe money trial by error style. As long as you get enough of a raise each year you won’t owe a penalty.
This is kinda what I do, I work out of state so I have been tweaking to get my state refund for one match the balance for the other because I’m too broke otherwise.
I’m getting $500 back this year. Sometimes I owe that much and offset with additional HSA contributions.
I don’t sweat it much beyond that. Just make sure I’m safe harbored and reconcile in February.
Unless we’re talking tens of thousands of dollars variance, the “free government loan” is entirely immaterial for most people, especially when savings accounts were paying a fraction of one percent interest and investments would either ring up ridiculous fees or require lot purchases far beyond the excess withholding.
I’m drinking beer this afternoon and don’t know if there’s a point to what I just said.
Idk why I was down voted. You get dividends from stocks and interst from bank accounts.
Definition: Dividend refers to a reward, cash or otherwise, that a company gives to its shareholders. Dividends can be issued in various forms, such as cash payment
If you have a credit union instead of a bank they may call it a dividend because you are a member of the union.
Definition: Dividend refers to a reward, cash or otherwise, that a company gives to its shareholders. Dividends can be issued in various forms, such as cash payment
They make their money by investing mine. In return, they provide me a safe place for my cash and financial services. Fair deal. I’m OK with that.
Having said that, fuck banks for private individuals. Go credit union, all the way. And while we’re at it, call your bank and tell them you don’t want overdraft protection. They have to turn off the NSF fees, and that’s not my opinion and it’s not negotiable. It’s law in the US.
Wait, as a bank? I’m suprised your uni has one as I expected them to be quite hard to run. Wouldn’t you need to employ a couple of good economists to invest the money, keep a part liquid, etc. for you?
I’ve seen a handful of "university of [place name] credit union"s I imagine it’s a case of “we already do some financial products, might as well cut out the middle man and make it a branch of the business”
I also worked at a regional bank with about 20 locations. Out of the 120 or so employees most were tellers and branch managers, then only about a dozen were behind the desk people doing literally everything else keeping the lights on, so in terms of headcount it doesn’t take that many people to run a small bank. Hardest part is raising the capital to get a bank charter (I think that’s like 10 million dollars for a single location last I looked)
I’ve lived in several places and at least two of them (including the one I have now) had a credit union as a university thing that only people affiliated with a university can use. I have one now because my wife used to work at the university, so we qualified for them then and you get to keep them even if you no longer are affiliated.
I wish you got to keep your right to pay for a membership to the university sports complex. Seriously, if you were an employee or student, you could pay $15 a month to use the track and pool and weight room and stuff. But if you weren’t attached to the university, there is no amount you could pay to use it. They also made employees pay for parking. My wife has worked for two universities. Both of them made her pay for a university parking sticker. But, again, if she or I wanted one now, we couldn’t get one. What the fuck.
Reminds me of one of the ‘warnings’ they gave us in basic training - tldr is that the folks in finance are just as dumb as the rest of us, and invariably there are a couple recruits in every batch that have their first paycheck MAJORLY fucked up.
Like, instead of the $400 we’re supposed to get, we’d get like $40,000 cuz of some fat-finger fuckup in Excel.
The warning was “DO NOT TOUCH a single cent of money you’re not supposed to have, cuz they WILL notice and you WILL have to pay it back!”
…which in my mind translated to: “If you win the finance fuckery lottery, all your loans just became 0% interest!!”
Don’t know how that works with the feds, but I worked IT for a private payroll firm. If we fucked up and put extra money in your account, that was your money. We had no means of taking it back. None.
Imagine the possible scams if it wasn’t that way!
Caveat: If the bank fucks up and deposits too much, while that’s on them, you don’t get to keep the funds.
I’ll note: American employees, while not having the protections we should have, probably get more than you think. If you start work for us and I send you a $3,500 MacBook, and you quit next week? LOL, keep it. HR can’t hold your last check or any other such thing.
Was the benefactor of finance mistake in military. It’s not your money, it’s the government’s. They take it back. You have no defense and no rights.
Bonus is if they screw up and give you $25k extra like they did me, you can pay it back as 10% of your base income, interest free. Turned out to be a 0% interest 3 year car loan for me!
So I’d make a few bucks in interest off it. I’d rather give it to them for a nice little payday around March and to not have the stress of trying to hit close to zero without owing.
Yup. Folks seems to be oblivious to the fact that increased interest rates mean savings accounts are pretty decent these days if you shop around. I’m getting 4.5% in a high interest savings account which would’ve unthinkable a few years ago.
Not much different than having it in a chequing account except that I’m less likely to spend it on something stupid.
1 year GIC rates are pretty good (4-5%) but considering that 50% of people under 55 can’t afford a $1000 surprise expense it’s not really a question of getting a handful of dollars from interest that the government could have given you to invest.
See facts like this make me wonder if a Norway style sovereign wealth fund could be developed to close the gaps in people’s quality of life and what they’ve put into working.
It’s not like the US is short on natural resource wealth to invest as the principle, and put together with a restructured tax regime it could significantly reduce the net burden for most americans, and especially the most misfortuned americans.
Being a net importer, means the US consumes more than it produces. It vaguely makes sense because it is still a growing county.
Norway’s oil fund protects the domestic economy from the negative consequences of being an oil exporting nation. Less kindly, you could call it currency manipulation. The US would be ill-advised to do like-wise, given its import surplus.
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