Well, the IRS is officially accepting 2012 tax returns. I filed mine over the weekend. Our tax situation isn’t too complicated, and I filed my taxes in about an hour and a half. I never get a huge refund, which is exactly how I plan it. I’d rather have less withheld from my bi-weekly paychecks than have a big lump sum tax refund once a year. As such, I am getting back less than $10 this year on my federal taxes. That’s fine with me. I know other people that actually adjust their W4′s to withhold extra so they get a big refund each year. And that’s fine too. Back when savings accounts actually paid a decent interest rate, I was in agreement with those that encourage lowering your tax withholding to avoid getting a big refund and giving the government an interest-free loan during the year. But with rates near zero, it really doesn’t make a difference. If you find it hard to save any money during the year, I can totally see the logic in withholding a little more in taxes so you get a nice refund every year. For a lot of families, a nice tax refund is the only way they can go on a vacation, pay for braces, replace a vehicle, etc.
But anyway, it always seems like people get really hung up on federal income taxes. Obviously no one actually likes to pay taxes, and federal income taxes are the area that most people associate with being taxed. But when you think about it, the amount we pay in federal income tax is just one component of our overall annual tax bill.
Just for kicks, I ran some calculations on how much my family actually paid in taxes for 2012…
- Federal income tax: $1,500
- State & Local Income Tax: $1.800
- Property Tax: $1,160
- Vehicle Tax: $250
- Social Security Tax: $3,000
- Medicare Tax: $700
- State Sales Tax: $450 (estimate based on our monthly non-food spending)
- Gasoline Tax (federal & state): $215 (estimate based on our annual mileage and fuel efficiency)
- Total Taxes Paid for 2012: $8,850
Ironically, the tax that is most talked about (federal income tax) is actually only my third largest tax bill. I pay more twice as much in Social Security tax than I do in federal income tax. I even pay more in state and local taxes than I do in federal taxes. You hear stories about stores and companies nickle and diming you, but the government takes the cake.
Now, I’m not totally railing against all taxes. I perfectly understand that it takes money to run the country (along with my state and city). My taxes go towards maintaining the national defense, building roads and bridges, paying for my grandmother’s Social Security and Medicare benefits, providing an education for children in public schools, and a multitude of other things such as paying interest on the national debt. Taxes are simply one of those necessary evils that we have to accept. From a historical perspective, tax rates are at some of lowest rates they’ve ever been (at least for Federal taxes). It doesn’t mean I agree with how the government spends my tax dollars, but there’s not much I can do about it. Like they say, the only certainties in life are death and taxes…
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Jose
February 12, 2013 at 8:44 am (UTC -4) Link to this comment
I’m still waiting on TDAmeritrade to have my consolidate 1099 ready. Their website said it should be ready by the end of February, sigh….. Otherwise everything else is done and ready to go.As much as I like their platform, that is one thing that irks me year after year about them.
Johnny Moneyseed
February 12, 2013 at 10:55 am (UTC -4) Link to this comment
If $3000 was taken out for Social Security for 2012, you’ll be looking at closer to $5000 for 2013 ( assuming no increase in wages ).
John S @ Frugal Rules
February 12, 2013 at 12:52 pm (UTC -4) Link to this comment
We just starting putting ours together over the weekend and will get it all shipped off to our CPA in a week or so. We’re just waiting on a 1099 from our brokerage as they have until 2/15 to send them out.
Lance@MoneyLife&More
February 12, 2013 at 5:26 pm (UTC -4) Link to this comment
Glad you realize your social security payment go toward your grandma’s benefits. It is sad but true.