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Tax Wrap 2011

Another tax season is in the books and I’m wondering what the Liberty Tax guy that has been standing on the side of Route 40 for the past two months is doing today…  At one point a month or so ago, I rolled by with the window down and must have unintentionally had either the “are you kidding me?” look, or the “I feel sorry for you look” on my face.  I’m not sure which, but the guy leans toward the window and says “hey, I’m just a business man, trying to make a living.”   I suspect that business is tough for these guys — which got me started thinking about how the tax filing season has changed so dramatically in the past decade.

For all our criticisms of the IRS, the agency seems to embrace technology to make its operation more efficient and to better serve the public.   Some readers will certainly disagree — but I find it absolutely amazing that the agency will process over 82 million returns in what amounts to about 80 days.   And the public has embraced the techonology too.  About 80% of returns (either self-prepared or prepared by a professional) are now e-filed.   And, despite our image of the midnight run to the post office in Baltimore, most people file early — with about 3/4ths of returns in before April even hits.   I’m not sure the government loves this, though.  With the filers receiving an average refund of about $2,970, this is, in essence, a 244 billion dollar little loan from 2010 that the American public is calling due.

Ever wonder how the government is spending your taxes?  Here’s a great little tool/illustration:  http://www.wheredidmytaxdollarsgo.com/.  Plug in your income and roll over the pie chart. 

Last, I can’t sign off from this post without adding the old two cents on that refund the average household will receive.  I’m seeing news stories about giddy retailers hoping that (unlike last year when consumers held onto their refunds) we’re all going to enjoy some retail therapy after the tough economic times the past couple of years.   Given sky-rocketing gas prices (not to mention the resulting price increases on food), we all need to think twice about how we spend that refund.   Perhaps a good strategy would be to put the refund into savings for a few months before allowing yourself to spend it.  A few months of delayed gratification can offer a ton of perspective.  Alternatively, let yourself spend a small portion of it — perhaps 10% — on a splurge, and put the rest into an IRA or college savings account for your child.  I wonder how the Liberty Tax guy will spend his refund?  Maybe on a warm March day in 2012, driving down Route 40, I’ll have the chance to ask him. 

hocoblogs@@@

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Categories: Uncategorized
  1. 04/19/2011 at 1:02 pm

    For anyone to spend their refund seems foolish when you hear how few people have 401K plans or college savings plans. We have also tried to put any raise we received into a savings account for unexpected expenses like a car or house repair. Another savings account was for the amount of a car payment that we didn’t have because we paid cash for cars from that savings account. You can get a nicer car when you never pay any interest on a car loan. Just a little delayed gratification pays off big time.

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