Sunday, April 08, 2012

Getting A Big 2011 Tax Refund

I roughed out our 2011 Federal and State tax return and, as expected, we'll be getting a really big tax refund.  A big refund is not the norm for us.  Usually, we get a small refund (e.g. about $100) or owe a few hundred dollars. This year we'll be getting significantly larger refund.

The reason for the big tax refund is the over withholding for the exercise of stock options I retained when I retired.   My company's policy is to withhold 25% federal taxes and 5% state taxes for stock option exercises, which is way higher than my tax bracket since I'm retired.  (For reference, the withholding would be accurate if I was still working at my old job.)   I've requested for the withholding to be reduced and be more accurate, but my company's policy prevents the change from being made.  So it appears that I will be getting large refunds for the next few years as I exercise stock options, provided there isn't a big market crash that makes the stock options worthless.

Since I currently expect to have a large tax refund for 2012, my goal will to get our 2012 tax return filed in February next year, which would be the earliest I've ever filed a tax return.

For more on New Beginnings, check back every Sunday for a new segment.
This is not financial or tax advice. Please consult a professional advisor.

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