If you’ve ever filed your taxes… Let’s start over. After you’ve filed your taxes (you should always file your taxes), there’s often some trepidation. The question “How much more will I owe the government?” is surely on a lot of people’s minds. However, with slick programs like TurboTax, you will instantly know what’s owed or what the return will be! In fact, you can see the amount in real time as you complete each form. So I highly recommend purchasing TurboTax or HR Block software (that’s what we use) if you’re not into…trepidating… Now that we’ve established I have a questionable vocabulary and what method we use to file our taxes, let’s turn to our 2015 taxes.
It was like friggin’ Christmas in March!
Like good little investors, we maxed out our traditional IRAs ($11,000 total allowed, since we’re married), and set aside a good amount in our 401Ks. After accounting for income, other taxable accounts, interest from savings, and mortgage interest, we delightedly found out we had a return of $1681 from the great state of Montana and $1478 from the Federal Government. And, as mentioned in a previous reno post, H&R Block also had a deal going that if you used your return to purchase a gift card of $100 or more, they’d match at 10%. So we got a $500 gift card to Home Depot (knowing we had our kitchen remodel coming up) and they tacked on an extra $50. In sum, we had a tidy $3209 tax return.
Of course, we stashed it away in savings and investments, so it wasn’t that fun. But getting large sums of money is still neat. Yet, in the back of my head (where all the serious thoughts congregate), I felt like that return was a little too big. Were we wasting our hard-earned dollars by overpaying the government every year? Couldn’t we have been investing that money along the way, letting it earn more than throwing a lump sum in once a year? The clear answer was “yes!” What I didn’t know was how to pay the government exactly what I owed. I was ashamed. Here I was, trying to retire early, talking up investing, budgeting and more and not a clue that the answer was a simple change to my W-4 form.
Using my financial library “Google,” I came across the IRS website. They have a nifty calculator where you can figure out how many allowances you should put on your W-4 form. Turns out, when I took my first real job four years ago, I had agreed to heartily pay more than my fair share of taxes.
Mrs. Fi did the same thing–I expect our invitation to the White House dinner will be coming any time now.
Long story short, we get to keep more of our paycheck, invest it, and come out mostly Even Steven when it’s tax time. If somehow you missed the boat on your W-4 form, you can always go back and change it at any time.
The process is simple! So don’t be fooled–large tax returns can seem cool, like finding a pineapple randomly in a field. However, it’s better to get some small pineapple seeds along the way so you can plant them as you go. Then you’ll have a whole freaking grove of pineapples! And who doesn’t love copious amounts of pineapple?