For U.S. Citizens, getting a large tax refund in an annual basis is definitely a blessing for each coming year. This is due to the fact that the Internal Revenue Service (IRS) is very strict when it comes to collecting taxes. In addition to that, a tax refund is as good as cold cash. So if you’re a taxpayer, it’s only natural for you to look forward to tax refunds each year. And most of us usually think that the bigger it is, the better.
Cutting long introductions short, large tax refunds only look better in figures. The truth is, however, most of us don’t know that just like taxes, refunds can also pose a headache to most taxpayers as well.
Listed below are the reasons why you shouldn’t get a large annual tax refund:
- Large Tax Refunds incur interest-free government loans. What most taxpayers don’t know is that large tax refunds incur interest-free government loans whenever they receive a large tax refund every year. This ‘loan’ is being collected in form of additional money as payment for taxes. Needless to say, it’s just like the government owes you money without even paying for monthly interest, which is a direct contrast to what they usually do to taxpayers.
- Large Tax refunds are usually spent unwisely. Thinking of it as a bonus, taxpayers usually spend tax refunds without even thinking of priorities in the first place. One interesting example is that a certain taxpayer had spend his refund for the last year in order to buy a new appliance set instead of allocating it for monthly bills. Because of this, he didn’t know where to get additional money when the time to pay his electric bill came and his income for that month came up short.
- Large Tax Refunds mean that you pay too much for your taxes. In addition to the fact that large tax refunds are like government loans to you, it also means that you’re paying them too much. If left unchecked, you will eventually lose more money than usual instead of saving it. So instead of ‘loaning’ the government, saving up your extra money as bank deposit is much better. In this way, you may even collect interest in an annual basis aside from the fact that you have more money to spend whenever the need comes.