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Tax Refund Is Not Free Money

With the start of a new year, also come thoughts of tax returns. April will be here before we know it. People who are expecting a refund usually file their taxes earlier to get the refund earlier. But a tax refund should not be considered free money. If you do receive a large tax refund, you are essentially giving the government a tax-free loan.

If you usually receive a large refund, it would be wise to look at your deductions you have marked on your W-4 with your employer. If you change your deductions and have less deducted from each check you could either use that on other expenses throughout the year or save it and use it to buy something like you use your tax refund.

Also, some people use their refunds for things that they could not normally afford. It is fine in some cases to purchase these things, but if you do have debt, it would be wiser to put that money toward your debt.

Also, if you e-file, it is possible to pay extra to get your refund faster. Look into the fees for this before doing it. In some cases, the fees associated with it will take a large chunk of your refund.

So, although it is nice to receive that extra money in April, take a look at how much you do get back and see if it would be wiser to change your deductions.

More information can be found on the IRS website.