Posted On: Friday - April 24th 2020 1:38PM MST
In Topics:   Economics  US Feral Government  Taxes
Whoa, this sounds like a post from your expert financial advisor, the whiz kid with the 2nd house in the mountains of Chile, who come to think of it, hasn't been reachable at his first house since, crap, maybe 2 months! No, this is just a short continuation from the thoughts on the insidiously evil scheme of income tax withholding from ~ a week back in this post.
At the very end of that post I mentioned the lack of leverage on the part of the taxpayer that has been another result, intended or not, from the change to one's writing a large check each April 15th versus having the money drained nice and slowly, and quietly. The change was 77 years back, so it's not like anyone under 100 y/o would know any other way.
Quite a few years back the IRS sent me a letter saying I owed something in the neighborhood of $500 from an error in my return. Due to my not-so-hot financial situation that year and a few prior and not insignificant inflation since, that was like $10,000 for me today. It was not at all clear to me what the discrepancy was about. I did my due diligence, staying on hold for 1/2 an hour, getting told to call back, and trying again a couple of times (as I just wrote earlier today, I don't give out my phone number). The matter was not settled, and that was just fine with me, because I couldn't just spare the 500 dollars.
The next year was a welcome change, with a new job with good pay, so I was even in a not particularly bad mood doing the forms that year. Due to all that withholding, the Feral Gov. owed me something just over $1000. A month or so later, here comes that nice check... for ~ $500. WTF!! Yeah, they pilfered the money from that discrepancy right out of it. That was it! No more refunds, if I can help it.
Now let me digress on that refund thing. People with poor financial management skills seem to treat the tax withholding system as a non-impulsively-drainable savings account. They can't seem to keep money in the savings account, as sudden expenses, such as granite countertops, shiny rims, and things like that keep coming up out of nowhere! The withholding program lets them participate in a forced savings account with what's always somehow a nice surprise from Uncle Sugar in May or June, unless they pay an extra $300 to get it in January. This has the effect of making the Fed-Gov the nice guy too.
I'd always ask people why they wanted to give that interest money to the government after complaining about how much it was already taking. Ooops, I'm thinking of over 15 years ago, when real interest was a thing. Nowadays, it's not a factor.
The leverage factor was something I learned after that unresolved $500 discrepancy fiasco. I try to work it out where I owe the Feds a little, but in the year 2019 it worked out to a lot. Got a discrepancy, IRS, well, you'll just have to get ahold of me somehow. Don't call, as that's really disturbing, plus you can't. You don't have my email. Just send a nice letter - be nice, now - and I'll get back to YOU.
Imagine if we had the leverage due to owing 15 large in mid-April each year. Would the IRS really be hauling millions of people to Leavenworth, or would they be such a nice organization, that the headquarters would have to be located in Minnesota, dontcha' know?*
* Shout-out to commenter Ganderson!