I can’t speak for the rest of the world here (well, I can, but it stands a high chance of being discovered to be false) but America has a much smarter approach to making you do your taxes than the UK does. In the UK you slave away all year, fill in your tax return, send it off and in a couple of months you either gain or lose a few quid. While you’re filling in the forms, you think about how the government are taking all this money that you worked so hard to make and spending it on gay marriage and old people. In America, you almost always get money back. This means that, whilst they don’t like form-filling any more than anyone else, Americans aren’t thinking the same stuff while they are sitting there writing down their social security numbers. They are actually thinking of the ride-on lawnmower, or the new flat-screen television, or the Sheryl Crow special edition real doll that they’re going to buy when the refund comes in. These are not necessarily the things that I personally thought about. I don’t have a lawn. I am also against neither gay marriage nor old people, just to nip that one in the bud.
Australia is the same… People get very excited about their tax “refund”, but of course the reality is that most of it is tax they’ve over-paid and the government has been withholding for up to a year, costing you interest on that money – so it’s actually a zero-interest enforced savings plan. Added to that, the money is worth less in real terms when you get it back! So much better to have the British model and have your money in the bank rather than under the government’s mattress!
Canada is similar too, unless you’re self-employed, in which case they wait for you to make money for two years and pay it all off at once, at which point they start hitting you quarterly. I must say, having to make the payments quarterly is much harder than one in April as it means you have to have this money on hand rather than borrowing it from the bank once a year.
This isn’t so great when you are a student and working full time!
Um, there is a form you filled out when you started employment in the US called a W4. It tells the government how much tax you want witheld (the key bit being the number of “allowances” you are claiming … the higher the number, the less tax they deduct). It sounds like you just have your allowances set wrong … there’s certainly nothing systematic in the US about everyone paying too much tax and getting a refund.
Aren’t these refunds just a tax free loan to the US governement?
Well, most people get a refund, but my household isn’t one of them. I hold my breath every year in anticipation of the bad news. I’ve had to pay in anywhere from $300 to $1500 in any given year. I know what you’re thinking, but I already have them withhold at the highest rate. I think the main problems are that we don’t have any children, and also that we have paid our mortgage down so low that we no longer can write off the interest (in other words, we have no deductions). There really does seem to be an incentive for people to stay in debt (buy more house than you can afford, pay the minimum, write off the interest, etc.) at least in terms of our tax code!
I thought only people who didn’t make very much money got refunds. I would bet that most people in the US have to pay taxes in April, not send off for their refund check.
Since I do not make a lot, I always write ‘exempt’ on my w4. Why should I let the gov’t keep my money and send me a refund check later, as if it’s some magical gift or reward. F**k that. I’ll take my money all at once, thank you.