Tax refunds aren’t a good thing

Today in the gym locker room, a woman around my age who was changing next to me was having a slightly frustrating conversation with her friend about taxes — to a financial nerd like me , at least. She said that she had started doing them on online but was discouraged after the tax program she used told her she still owes the government money, and not vice versa. This is where I wanted to pipe in and say, this isn’t a bad thing!!

Although psychologically, it is upsetting to have to pay out money, practically, it is better to owe the government money at the end of tax season than to have it owe you. Think about it: if you had that money for the past year, you could have kept it in a mutual fund, an interest-accruing savings account, a CD, etc. So, you might not have made a ton of money in 2009 — certainly you would have made  more during the flusher periods in this nation’s history. Still, that doesn’t change the fact that a tax refund usually is the money that you didn’t owe in the first place.

So, the woman in the locker room concluded from this that she should leave her taxes to a professional, even though she only had to report her work income on her tax return. My question (which I couldn’t bring myself to ask because I still have my tact): WHY would you use an accountant when you only have one source of income?? In her effort to get a refund that she thinks she is owed, she will just end up shelling out money for H&R Block, or whoever and probably lose more money. Contrary to what people think, filing taxes on a single income that derives from a W-2 form isn’t much harder than filling out other forms in life. Filing taxes often get trumped up as rocket science because working on them is an annoying bureaucratic chore as well as a reminder of the money not in our possession. Now, I grant that Donald Trump, or even the average middle-aged professional, has a bit of a headache with taxes, but for young people like myself, there are much harder things to do.

[The hardest thing about a tax return, in my opinion, is keeping straight all of the different form avenues (1099-div, 1099-G, W-2, etc.) you must complete before finishing the 1040, which combines all of your reported income].

My own recommendation is Turbo Tax, which currently allows individuals to file their federal returns for free. Many banks also discount or pay the whole Turbo Tax state filing cost. Or, you could try your hand at the 1040, which, I admit I haven’t ever done, though I have filed state returns by hand.