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10 Tax Refund Myths

        Money | Taxes

9
A large refund is a good refund
A big refund is great to hold but what else could you have done with that money during the year?
A big refund is great to hold but what else could you have done with that money during the year?
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Of course you'd rather receive a check than write one. But letting the government use your hard-earned dollars interest-free, just so you can receive a big refund, isn't really a wise financial decision.

Your optimal objective should be to regulate your withholding exemptions, and thus the amount of tax you pay during the year, so you stay more or less even with the government. You don't want to owe a lot or suffer a penalty for not paying enough of your tax obligation. On the other hand, a huge refund check is a sign that you paid too much over the year. You'd have been better off putting that extra money in a savings account where it could earn some interest.

By diligently putting a little away each month, you'd have something extra to remodel your kitchen, take a fantastic vacation or even pay off bills on your schedule rather than the IRS's. And if you did end up owing the IRS some funds, you'd have some money socked away to handle that.

To change your withholdings, simply complete a new W-4 form for your employer.


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