Most of us wouldn’t go around loaning strangers money and allowing them to pay it back interest-free over a year later, but if you get a tax refund this year, you are doing just that: acting as a personal bank to the government with the most generous rates and terms in the world. The only people who ever gave you a loan that good were your parents. Consider this when you file this year with your fingers crossed that you’ll end up with a fat check you can use to buy a big-screen TV or put toward a much-needed vacation.
“A tax refund generally indicates you’ve paid Uncle Sam too much with each paycheck,” U.S. News and World Report writes, noting that the average refund is about $2,800 (!!). That extra $107 every two weeks could’ve meant paying down high-interest credit card debt, or putting more money in your 401k (which generates compound interest) or even just actually enjoying your life without using the government to save your money for you without generating a cent of interest on it.
All you need to do to correct the problem is recalculate your withholdings and update the form with your employer (more exemptions means the IRS takes out less money). Yes, it’s unlikely you can get that balance down to zero, and certainly no one wants to end up owing taxes. And it will probably also take a minute to psychologically catch up that getting nothing in April is actually a good thing — but realizing every other day of the year will be just a little bit financially easier ought to convince you soon enough.