Some people go to extremes in their attempts to save on taxes. According to TurboTax, here are some of the crazier deductions people have tried to claim:

  • A floundering business owner hired an arsonist to burn down his building in order to collect on insurance and then tried claiming the $10,000 he paid the arsonist as a consulting fee
  • Many people have tried to claim pets as dependents
  • One father-of-the-bride tried to write off the cost of his daughter’s wedding as a business entertainment expense because he invited several clients to the wedding
  • Several people have tried to claim the cost of getting a tattoo as a medical expense

While most people claim legitimate deductions, most also overpay their taxes, giving Uncle Sam, in essence, a free loan. Around 80 percent of filers get money back, with the average refund totaling over $3,000 this year.

Many people are happy to get a big refund check. Some consider it a form of forced savings, and that’s okay if you can’t save otherwise and put the money to good use. However, big windfalls often turn into big splurges, so it’s best to decide how you’ll use the money before the check arrives.

If you usually get a big refund, another option to consider is changing how much is withheld from your paycheck throughout the year. While it’s too late to influence how much you’ll owe or get back this time around (actually, you have until April 18th to make contributions to an IRA or Health Savings Account for last year), right now would be a good time to start managing next year’s tax bill.

You can estimate how much you should be paying in taxes by using the IRS online calculator. Better yet, download the forms you need and fill them out by hand. After doing that for a number of years, I created an Excel spreadsheet with the relevant boxes from the federal 1040, Schedule A (itemized deductions), and the Child Tax Credit worksheet. Taking a more hands-on approach has helped me understand how different factors impact how much we pay in tax. Some of the do-it-yourself tax software programs also have tools that enable you to prepare an estimated return for next year.

To change how much is being withheld from your paychecks, contact the human resources or payroll department where you work.

We all have to pay our taxes, but there’s no requirement to overpay.

How do you manage your taxes? Do you like getting a refund or do you prefer not to use the Uncle Sam savings plan?