Category Archives: Refund vs. owe

Tax tip – read the instructions!

Pile of coins

Copyright 2016 Sweet Doll Designs

I know by writing this post, I will be revealing myself as a major dorko, but here goes, anyway 😉

While Accounting is my profession, I am not, nor do I ever have the desire to be, a tax accountant.  Having said that, I always prepare my taxes by hand, check my work on Turbo Tax, then I file my tax return through the mail.  I do this partly so that I fully understand how my taxes are being calculated and partly because I don’t want to pay Turbo Tax to file my returns for me.

Over the years of filling out my 1040 form myself, I’ve discovered that the IRS includes really helpful line-by-line information in the form’s accompanying instructions.  With that in mind, here’s my big tax tip that will only take a few minutes, but has the potential to save you money:

Read the 1040 form instructions!

Specifically the section on Adjusted Gross Income, which can be found if you scroll down to page 31 of this pdf document:  Dorko alert: I read through each of these potential deductions carefully to see if I qualify for any of them.  By doing so, I found that I qualified for one – you may be pleasantly surprised that you do, too!

There are only 13 possible deductions in this section, so it won’t take you long to read the instructions.  Examples of popular deductions are: student loan interest, tuition and fees, IRA, HSA, moving expenses, and alimony paid, to name a few.

It is also worth your time to read the Tax and Credits section found on page 38 of the same pdf document:  There are only 7 credits to read about, so again, it won’t take much time.  In this section are credits such as: retirement savings contributions credit, residential energy credit, child tax credit, and education credits, to name a few.

I have always found that reading the IRS-provided instructions while filling out my taxes has been very helpful and well worth my time.  Also, if I have any questions when reading the instructions or am not familiar with a referenced form, I just quickly look it up on the IRS website.  I know it may seem scary, but the IRS website is really very easy to use and understand, helpful, and informative!

Good luck with your tax returns this year!  Remember to file by April 18, 2016.

Happy Decoding!

Fun fact for today: Have you ever wondered what the difference is between a tax deduction and a tax credit?  A deduction is taken before calculating your Adjusted Gross Income (otherwise known as your AGI).  Your taxes are calculated on your AGI less the itemized or standard deduction and less your exemptions.  On the other hand, credit provides a dollar-for-dollar reduction of your tax due, since any credits are subtracted from the tax amount due.  A deduction isn’t better than a credit and vice versa, but it’s important to be sure you claim all available deductions and credits if you qualify for them! (Source:

Disclaimer: This blog post is not intended to be tax advice.  For answers to your specific tax questions, please consult a tax professional.


To owe or not to owe: that is the question

Copyright 2014 - Sweet Doll Designs
Copyright 2014 – Sweet Doll Designs

Now that my husband and I have filed our 2013 taxes jointly for the first time, the discussion in our household is how to organize ourselves for tax season next year.  Should we receive a refund or should we owe taxes for 2014?

While I think it’s nice to get a refund on my taxes, when I think about it, getting a refund means I’ve given the government an interest-free loan.

A few years ago, I re-configured my tax deductions so that less taxes are taken out of each paycheck, and at the end of the year, I owe a bit in taxes.  Since less taxes are taken out of my paycheck, I put the extra money I receive straight into a savings account where I earn interest throughout the year.  Then at the end of the year when I calculate how much I owe in taxes, I simply take the money out of my savings account and write out a check.

This way, the government has given me an interest-free loan, and I’ve earned a bit of interest in my savings account in the process.

I know that some people use their refund for vacations or other big purchases.  This is also fine, but again, consider that you’re loaning that money and not earning any interest on it.  Wouldn’t it be better to save your money each month so that you can afford that same vacation or other big purchase, all while earning interest in the bank?

Stick with me and I’ll give you some tips on painless ways to save in future posts!

I am not a tax professional and cannot give you tax advice*.  All I’m encouraging you to do is consider your options.  It is worth asking the Payroll department of your company what your paycheck would look like if you changed around your tax deductions.  You might even use that information to re-calculate last year’s taxes and compare the result to be sure you wouldn’t owe too much in taxes.  Then make your final decision (which can always be changed again if needed).

If you’re looking for a great savings account, I have been very pleased with Capital One 360 (formerly ING Direct).  They offer some of the best interest rates I’ve found.  As I write this today, the interest rate on my savings account is 0.75%.  Compare that to what a traditional bank is offering and you will see a huge difference (my traditional bank is offering a 0.01% interest on my savings account – I only keep it as overdraft protection).

What I really like about the Capital One 360 account is that you earn more interest than at traditional banks, you can have as many accounts as you want (each for a different purpose, if you wish), there are no account minimums, and it is super easy to transfer money whenever needed.

Capital One 360 did not pay me to promote their products and I am in no way affiliated with them.  I am simply a happy customer.  If you’d like to look into opening an account with them, please consider using this link:  If you open an account with $250 or more, both you and I will get a bonus!  It’s a win-win for everyone! 🙂

So what have you and your household decided is the best way to handle your taxes?

Happy Decoding!

Fun fact for today – The first US income tax started in 1862 to help raise money for the Civil War, which began April 12, 1861 at Fort Sumter, SC. (Sources: and

*Please consult a tax professional when making changes to your deductions that will have an impact on your taxes.