Wednesday, December 14, 2005

2005 Tax Estimate: I'll Owe $1,145

Yesterday my mortgage company emailed my 2005 year-end statement (form 1098) to me showing the annual property taxes and total interest paid on my condo. I decided to pull my latest paycheck stub and estimate how my 2005 taxes will turn out. I've been using TurboTax for several years so I accessed their website and saw that they offer a free 2005 tax estimator calculator. You can find it on the left sidebar under Tax Planning and Tips. I entered my data and the result was that I would owe $1,145. I am very pleased with this estimate. I like to owe money come tax time so the government isn't getting a free loan from me. However I am careful not to claim too many deductions on my W-4 because it is possible to underpay on tax withholdings which will cause a penalty. You will need to have your most recent pay stub to run the numbers. Below I show the inputs for my calculation. It is only an estimate because I did not have my charitable deductions handy, nor accurate interest and dividend income figures. But it did give me an idea of what to expect for next April 15. Here are the figures I used as inputs:

I was very disappointed to see a TurboTax promotion offered called the Refund Bonus. If you use TurboTax and are eligible for a tax refund, you can direct some or all of it into the gift card program, where TurboTax will add 'bonus dollars' to your amount and return it to you in the form of a gift card for select merchants such as Starbucks, JC Penney, Lowes, Blockbuster, FTD Florists, Foot Locker and The Olive Garden. This is fine if you have a predictable, necessary expense such as home improvements at Lowe's. But to have your refund returned in a Starbucks gift card? That just guarantees you'll spend the money instead of using it to retire debt or save. I'm not a fan of this program at all.

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alex said...
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