Every tax season, millions of Americans eagerly await their refund check. It’s often called the “biggest payday of the year.”
But should it be?
A refund is money that rightfully belonged to you, which the IRS has been collecting and holding all year until you file your taxes. It’s money you overpaid to the agency during the year through paycheck withholdings that the government has been able to use but you haven’t.
To some taxpayers and financial experts, if your refund check is $3,000, that’s money you could have had in your hands during the year that instead, the government had.
Others argue that having the government hold that money for you isn’t bad and helps people end up saving more.
What’s the best thing then to do financially? It depends on what you’re comfortable with and what your goals are.
Here are the pros and cons:
Is getting a big tax refund a good thing?
No, some financial experts and taxpayers say, because it means you’re giving up too much of your paycheck to taxes during the year. If less is taken out for taxes, you’ll get a smaller refund but more money in each paycheck for expenses or saving and investing, they argue.
Some taxpayers go a step further and aim to owe the IRS money each year.
“My goal every year is to owe $1,000 or a bit less,” said Andres Olarte, a software developer in Chicago. “That way, I avoid paying penalties to the IRS and get to keep as much of my money as possible, even if it’s in a savings…
