Big tax refunds are reason for celebration. Or are they? It's understandable you'd be excited about a large tax refund. After all, it almost feels like found money! Of course, it isn't found money; it's money that belongs to you as the taxpayer, and the cash was simply delayed in making its way to the rightful owner's hands.
There are three common reasons why we receive large refund checks year after year. The first is that we just aren't paying attention. In our busy lives, we may not be focused on making changes that would better balance taxes withheld compared to taxes refunded. If it's not broken, why fix it, right?
The second reason is that we may not realize the implications. We may have never been taught that a large refund isn't necessarily a good thing.
The third reason is that some believe having a lot of money withheld from paychecks and refunded later is a sort of forced savings plan. Unsuccessful savers may welcome the opportunity to trick themselves into saving money.
But what are the implications of a larger-than-needed tax refund?