5 Reasons You Don’t Want A Tax Refund

As tax season winds up, many people have receive hefty refund checks, or are eagerly checking their bank accounts to see when the money will arrive.  While a surprise infusion of cash is hardly a bad thing, there are many reasons why you do not want to get a tax refund each year.  To understand why, you’ll need to understand the basics of how income taxes work.  And for that, I have spent the day working on my non-existent Power Point skills.  And then my non-existent HTML skills.  Oh, and then my .wmv and YouTube skills.  It has been a voyage of discovery.

Obviously, I’m not going to win any Power Point Ranger awards for this, but I hope it hits the important bits and makes it easier to understand.

So, on to my list:

Five Reasons You Don’t Want A Tax Refund

5.  People tend to overspend tax refunds.  They blow it on something big, then spend even more because they “just got their tax refund!”

4.  Tax refunds can be garnished for unpaid student loans, unpaid income taxes, child support, alimony, and interest and fees on previous tax returns.

3.  Refunds can be delayed, indefinitely, for a variety of reasons.

2.  Your overall cash management will be better if you have the right amount withheld in the first place.

and the Number One reason not to get a tax refund:

You’re giving the IRS a loan, and they don’t pay interest.

A big tax refund may seem like a windfall, or a good thing, but all it means is that you’ve had too much withheld over the course of the year.  Change your withholding to accurately reflect your tax situation, and you’ll get more in your paycheck and won’t get a big tax return.  You can use the IRS withholding calculator to make a good estimate of how much you should be having withheld, and change your withholding through myPay.

About the Author

Kate Horrell
Kate Horrell is a military financial coach, mom of four teens, and Navy spouse. She has a background in taxes and mortgage banking, and a trove of experience helping other military families with their money. Follow her on twitter @realKateHorrell.
  • The_Tech_Son

    Thank you, for the effort to post what I preached to my soldiers during my career! I’d hear people brag about their “big refund” (my brain would translate that into “I am fiscally irresponsible”), and see them blow it all on junk, with nothing to show for it.

    My “big refund” was a conscientious effort to add to my savings account. I found that the effort made to save made it harder to spend. . . . I guess the feeling of getting a refund is like winning a lottery, and it burns a hole in the pocket.

    Perhaps people will take your comments to heart, and wake up.

    Hopefully more people next year will brag, “I didn’t get a refund AND I didn’t owe anything!”

  • Gary Tober

    Not to worry! Banks and Credit Unions don’t pay interest, either! That is, unless you consider 4 hundreds of a percent as any money at all.

    Most of us need a way to put mney away in an easy,automatic way. This can be one.

  • Joe

    wow you found a bank that has a CD thats paying 3%. What is the holding period 10 year certificate?

    • KateKashman

      Actually, it is one year. It is with Navy Federal and it fits my family’s current needs perfectly.