Hello,

I tried looking up information on the IRS safe harbor rule, you mentioned. Can you direct me to some pages that might have more details about the same? Thanks.

Pavan

It is in IRS Form 2210.

http://www.irs.gov/pub/irs-pdf/f2210.pdf

Or follow this:

http://www.irs.gov/taxtopics/tc306.html

In short, safe harbors include:

1) Underpayment of less than $1,000, or
2) At least paid 90% of total tax, or
3) Paid 100% of last year's tax (or for high income families, 110% of last year's tax)

On the flip side, who's spending too much time on their finances and not enough on running the country? :)

Good point Jim! Maybe we can say Cheney has a much better accountant than Bush.

What was The President's 2003 total tax paid. He may have simply been making sure he paid 110% of his 2003 tax so that he would not owe any penalties as well. If his 2003 total tax paid was similiar to 2004 then he withheld almost exactly the correct amount.

As interest rates begin to increase this idea of not giving the government an interest free loan becomes a little more important but until recently it has basically been a meaningless event, that for most people would seriously amount to nothing more than a few extra dollars at the end of the year which of course presumes that they immediately took every extra penny and socked it into a savings account and likewise never touched any of it.

In practice that is rarely ever true. It may be a poor statement about people's discipline but I think most people would admit that savings that is dependent upon their discipline will never result in as much money in the savings account as things that are automatically deducted and put there.

When people are flush in extra cash, certain things that might be appealing that they don't need that they had not intended on buying suddenly become "available." Not that its not valid to choose to spend the money but the fact is that the big deal that is made out of not giving the government extra money is mostly a big hulabaloo over something that really does not make much of any positive difference in the end and I would bet in far more cases actually ends up with a negative net worth impact at the end of the year.

Now that being said the undisciplined can easily choose to blow the refund in one shot once they get it too, but it might be easier as a saver to just put the refund in one shot into savings.

So my argument is basically to suggest that the refund versus taxes owed issue is vastly exaggerated as some sign of great financial astuteness even though it is often heralded as such.