Thursday, February 05, 2009

I Knew Planning on a Tax Refund Was a Bad Idea

But not this bad. California holds back payments amid budget crisis | Reuters

If the only way you know how to save money is by getting a tax refund every year, you need some financial counseling. Instead of giving the government a 100 bucks a month as a zero interest loan, put that money in savings account. Yes, you can set it up to happen automatically. (I usually tell people to purchase mutual funds, but the stock market makes people crazy these days.)

Now we discover that the government - of California anyway - has decided that it doesn't want to pay back that zero-interest loan, or at least not for 30 days. Funny how when you give money to the government you often don't get it back. Do you think all those folks in Washington might think this is a good idea?

Whether or not you get a refund - barring extraordinary circumstances - is completely up to you and the information you give your payroll department. (Well, if you change jobs, or work more than one, you can overpay social security through no fault of your own.) Ideally, you should have to pay a couple of hundred bucks in April. No zero-interest loans to the government. No penalties for under-payment of taxes.

So now all those people in CA who thought getting a tax refund is a wonderful idea, may come to have second thoughts.

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