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Financial Literacy - Taxes
POLL
Americans say taxes are necessary
Most Americans feel that it is their duty to pay their fair share of taxes, yet many don't think the system is fair.
Taxes made easy

Taxes necessary, but not necessarily fair

Tax-free loans to government
Nearly 40 percent of Americans look forward to getting a hefty tax refund each year. They could adjust the tax withheld from their paychecks and make better use of their own money.

"They are giving Uncle Sam a free loan every year -- and like it that way," says Bankrate's McBride. "These are most often people under 35, with household incomes less than $50,000, and living in the Northeast. In other words, those with tight budgets struggling to keep up with the cost of living who could most use a few extra dollars in each paycheck instead of giving it to Uncle Sam."

Imprecise about tax withholding
Which of these scenarios best fits the way you handle your tax bill? Total
(1,004 respondents) %
18 to 34
(143 respondents) %
35 to 49
(230 respondents) %
50+
(569 respondents) %
You look forward each year to getting as big a tax refund as possible 38% 52% 39% 28%
You adjust your tax withholding so you don't get a big refund or owe a big tax bill 34% 27% 39% 37%
You have the least amount withheld from your paycheck so you pay up at tax time 13% 11% 15% 15%
Don't know/refused 15% 10% 7% 21%

"I think a bunch of people see that as a bonus or extra money," says Hughes of OMB Watch.

Over three-quarters of filers receive refunds and the average refund size in 2006 was $2,324. "That's an extra hundred bucks a paycheck," says McBride. "Who couldn't use an extra hundred bucks a paycheck?"

While paying in the extra tax money is without question a free loan to the government, some people view it as an effortless savings mechanism. Saenz, a CPA, says that for some, it's easier to let the government "hold onto it and give it back as a lump sum refund. Probably they have a harder time holding onto money and prefer the government save it for them."

-- Posted: Dec. 17, 2007
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