Tax Planning: 2014

The reason I write this is because I see a lot of people – especially the poor – who are going to get screwed come April next year (2014).  Instead of getting a refund they are going to be paying taxes which should have been withheld this year but weren’t.  I suspect a lot of low to middle class tax payers are going to find themselves in arrears – a precarious position given that many are living paycheck to paycheck without saving a cent.

They are used to getting tax refunds, these people.  Some depend on them.  Myself?  I haven’t gotten a refund in over twenty-five years.  And there’s a reason for that.

I don’t pay taxes – not a bit, not if I can help it.  I claimed the maximum amount of deductions (and then some!) when I was young, and now that I’m on Social Security I don’t pay at all.

That’s not to say I don’t pay any taxes.  I just pay them all at once at the end of the year.

You see, back when I was 21 or so I decided to keep the money myself.  That’s right: no deductions at all.  Of course working for someone else that meant I had to claim about 18 exemptions when I only had one: myself.  (We’ll exclude the dog.)  And instead of sending the money to my government (and always overpaying) I decided to keep it.

33 to 35 percent of my paycheck went to ‘taxes’ – FICA, Social Security, State and what all.  So I cut that to the least my employer would let me, down to around 10-15 percent – and I would calculate how much I still “owed” them.

That money I put into an interest earning account – earning interest on my taxes instead of paying them, and then paying all my taxes at the end of the government’s fiscal year.

A lot of people would be startled to get an $5,000 bill from the IRS, but I wasn’t.  I was prepared.  Not only that, but I earned money on my taxes – usually a few hundred dollars or so.  That is taxed, too,  but it allowed me to make money off my taxes.  And since I always paid more into my ‘tax’ account than the government demanded there was always an instant refund – whatever was left over (plus that interest) was MINE.  Let’s see H&R Block beat that!

Remember: It was the government’s money all along, but I refused to give it to them until the end of the year, just as I do now.  I earn money on my taxes, and despite what the government says – it’s MY money until tax time.  I know they don’t like it – they’d rather THEY earn the interest than me – only thing is, they are paying a higher interest rate to foreign sources nowadays than I’ll ever earn.

The problem is most people aren’t disciplined enough to take this kind of approach: banking your taxes, earning interest on them, and then paying a tax bill at the end of the year.  They see that ‘bank account’ as their money, not realizing it belongs to the IRS.  Touch it at your own peril.  That interest you earn – sure! – but if the car breaks down? The washer gives up? – not yours.  Not a dime, not a cent.

Hard to do when you are need and there – in an account with your own name on it – thousands of dollars.

But it’s not yours.  Only the interest is.

I’m an honest American (a lot of them are).  But what I see coming up this next year is going to take a lot of people, especially the poor ones, by surprise.

I wouldn’t be surprised to see a lot of people caught short – not this year, but the next one.  And all you Obama supporters – are you enjoying your smaller paycheck this year?  I’ve heard complaints already – lots of them, people saying “My paycheck’s dropped by eighty bucks” or a hundred or so.  (You gotta remember: my wife works with poor people – the poorer of the poor – and we hear a lot “out there”.)

And I’ve discussed this philosophy of “you hang onto your money – every cent! – and put your taxes in an interest earning account to earn interest on your taxes this year” – but none of the people I’ve talked to have been able to do that.

Instead they admit: “I don’t have the discipline to do that – sit there and stare at thousands of dollars when I don’t have a cent – when the car breaks or I run short – I’d be cashing it out . . . “.

And then they’d be spending the next year trying to figure out what to do about it – and the next one in jail, earning their tax money for IRS to feed on.  Thing is we’d be supporting them . . . not a good choice.

But due to payroll taxes being “guessed at” this year – I’m figuring a lot of these poor folks – who are expecting a refund each and every year – are going to find out they are on the shorter, crappier side of the stick come April 2014.  They are going to find their employer didn’t hold out enough tax, or ‘just enough’ to get the job done – and many are going to find themselves owing the IRS.

Not a good thing when you are poor.  And the thing is: this rabbit’s not coming home until next year.

I am guessing that come April or March of next year you are going to see either a “Taxpayer Relief Act” (in which penalty free tax extensions might be included) – or a lot of honest Americans fined and penalized for not having enough money next year – money to pay those taxes which they owed, but which were not paid – but they thought they were paid through their employer’s deductions – but they were not . . .

and those people are going to come up short.

Personally I am planning on up to a 46% rate this next year.  If any money is left over: it’s mine.  My refund’s right there – waiting in the bank for me, earning interest as it has been for all the past year.

The question is: Where’s yours?

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About jeffssong

JW is an adult childhood abuse survivor with DID*. He grew up in a violent family devoid of love and affection. He is a military brat and veteran. He no longer struggles with that past. In 1976 JW began writing "The Boy". It took 34 years to complete. It is currently on Kindle (http://www.amazon.com/dp/B004T3IVKK ), or if you prefer hard copy, on Amazon ( http://www.amazon.com/Boy-J-W/dp/1461022681). JW resides somewhere in the deep South. He is disabled and living with family. Note: Please feel free to take what you need; all is free to all. With that in mind, keep it that way to others. Thank you. We have 3 Blogs - One for our younger days, 0-10 (The Little Shop of Horrors); one for our Teen Alter and his 'friends' (also alters) with a lot of poetry; and finally "my" own, the Song of Life (current events and things)
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