Hopefully your taxes are done by now.
This time of year everybody talks about tax refunds. Whether it makes sense to get one or not, a “tax-free loan to the government”, and so on.
It’s worth looking at the financial reasons for and against getting a refund. In general, you should probably try to pay just about as much as you owe over the year. One way to do that is to use the IRS withholding calculator where you can fine-tune how much your employer sends them each month.
It’s also worth looking at non-financial reasons. Why do you do what you do?
Some people enjoy getting a refund. They feel like it’s a “prize” after the end of the year, but that’s not quite accurate. It’s your money, and it always was. If you’re going to use it for a treat, why not just budget for treats instead? Go ahead, you’re worth it.
When you owe, things can get ugly. This may be why so many people err on the side of getting a refund. We tend to dislike losses more than we enjoy gains (even when the dollar amount of each is equal), and owing at tax time can feel like a loss.
These days you aren’t missing out on much by getting a refund. The bank would have paid you very little on any savings. But it’s still worth aiming for (more or less) accurate tax payments throughout the year. You’ll force yourself to understand your income, expenses, and taxes as you fine-tune your withholding – and knowing more about how your money comes and goes is always a good thing.