Easy Does It
ONE OF MY FIRST employers allowed me to buy savings bonds through withholding from my weekly salary. It seemed like magic. Ever since, automatic payroll deductions have been an important part of my financial life.
My payroll deductions expanded to include my health insurance and my 401(k) contributions. It just felt good to me, kind of like the practice of regularly giving 10% of your income to the church.
On the other hand, payroll deductions are also how we pay taxes, which doesn’t seem like such a blessing. This culminates with the annual ritual of filing my income tax return. That’s when I learn whether I’ve withheld enough.
I’ve never used a preparer or accountant to calculate how much tax I owe. I prefer to avoid paying someone else to do something I can do myself. That’s my fallback position for many such chores. If I can do it myself, I will. I’ll pay someone for the harder things, like fixing my teeth or repairing my car.
Besides, when I do my own taxes, the government checks my work. If I make an arithmetic error, I get a letter from the IRS or my state’s tax department. It points out my mistake and informs me how much more I owe or—on a good day—how much more the government owes me.
To be honest, I’m not sure whether my do-it-yourself method has saved me money. If I miss a deduction to which I’m entitled, I’m paying an extra tax for my stubborn independence.
I started feeling more confident that I was getting my fair share of all the tax breaks when I began using TurboTax. The software asks a lot of questions that I’d never thought about to help me explore possible ways to save on taxes.
Yet there’s still a problem: TurboTax won’t challenge me if my entries are wrong. Luckily, whenever I’ve misunderstood a question—and seen the resulting taxes I owe—I’ve been able to backtrack and correct my misinterpretation.
In the end, TurboTax tells you how much you owe or the amount of your refund. I find it unsettling, wondering whether the taxman is going to demand more of my income. So far, I’ve never been in a position where the amount demanded has exceeded my ability to pay. Still, tax season is a stressful time for me and, I imagine, for many others.
This stress leads me to prefer to be owed a refund rather than having to write a check to the Treasury. I know, I know, I’ve heard it many times: Why make an interest-free loan to the government? Just pay Uncle Sam what you owe and no more. In the meantime, use your money to your own advantage. I get it.
It’s just that I hate paying for anything. Writing a check for underpaid taxes is something I want to avoid. I wish I could justify my feelings, but I can’t. When I calculate my tax return, if money is due to me, I’m relieved. I give the government my bank information and, magically, the money appears. I can relax for another year. Over the years, most of the credit for this relief has been due to my faithful ally—automatic payroll deduction.
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