So, according to our accountant, we DINKs are going to get a large tax return back when the IRS processes our paperwork. The question we’re trying to answer is what to do with the funds. We’re due back around $4,400 from the Federal government and about $450 from the DC government.
First off, we ideally shouldn’t get any money back at all. Getting a tax return back implies that you have been overpaying the Feds. Since you don’t get any interest on the over payments, it doesn’t make sense to get a return. Instead you should adjust your withholding so that you keep as much of your income as possible.
So why haven’t we do this? Our tax situation can fluctuate a great deal on a year by year basis. For example, when I went back to school, my income declined to nearly a 1/4th of what it was before school. Also, getting married has changed our tax situation as well. Since I don’t have a good sense of how these changes will impact our tax bill, my general response has been not to alter our withholding status.
Also I like getting a return back after the process of filing our taxes. Even as much as I love finance, its still a chore to assemble all our paperwork, send it to the accountant and deal with getting it filed. Getting a return back at the end of the process makes it more pleasant.