You Want a Smaller Tax Refund – Trust Us
I know, I know. We have all been there, expectantly awaiting our tax refund with our fingers crossed. Maybe now we can afford a family vacation this year. Maybe you were even going to put more money on a principal payment to your mortgage that you’ve been scraping to afford.
This seems like a counterintuitive statement to make, especially during the height of tax season. But believe me, there is more to this than you would think.
Here are some reasons why it actually makes sense to receive a smaller tax refund next year.
1. You Paid More Than You Needed
Sometimes getting our taxes back feels like a gift but truly, it’s not. It’s money that we worked hard for and earned ourselves, and surprisingly the more you get back the more you might have overpaid.
Overpaying in taxes may sound like a wild concept, but it does happen. That is partly why you receive so much at the end of the year. You can change the amount that is withheld on your W-4 at any time.
2. You Misjudge How Much You Will Get Back
This is a serious problem that many tax-paying Americans face. You thought you were going to get a hefty sum of money back, and you have already accounted for that refund for your income.
You assumed that you would be able to catch up on the rent with your return, so you spent what you had available before you had the cash in hand. Then when you do finally receive your return, it is much less than you assumed and now you are in hot water.
Sometimes this happens because your tax refund had been garnished to pay down whatever debts you might have had. This is unfortunate because even if you had paid down a loan if there had been a computational error your funds will be delayed even longer while the issue is disputed.
It is better to assume you will get a small sum back on your taxes so your brain doesn’t make the mistake of expecting more income than is guaranteed.
3. You Can Access Your Money Sooner
If you are going to receive a tax refund in the first place, that means the money is owed to you regardless of the timing. Why wait for half-way into the next year when you could have just received a higher amount on your paychecks regularly?
Why wait until tax season to scramble to pay your mortgage and make other payments when you could have had that money in your hand in the first place?
Besides, We all know how slow bureaucracy is, and how long it can take to get your own money back.
Changing your withholding status so that you get a smaller refund check means you have more money overall, consistently throughout the year when you need it.
You are free to do whatever you please, but hopefully, you will consider these points as reasons why you should opt for a smaller tax refund next year.