Why You Do Not Want to Get a Big Tax Refund Check


Each tax season, many people rush to file their return as soon as they can so they can get a big, fat refund check.

Sound familiar? If this is the pattern you’ve been in, money expert Clark Howard says what you really need is a reality check.

Don’t Make an Interest-Free Loan to the Government!

Did you get your tax refund yet? The average refund is $3,125, according to the latest numbers from the Internal Revenue Service (IRS).

What would a check for $3,000 mean in your life this year? You could use it pay down debt, take a vacation or fund your retirement.

But we’d like to suggest another alternative for next tax year: How about making it so you don’t get that big chunk of change in the first place?

As weird as it sounds, that’s actually Clark’s hope for your wallet.

“I’d prefer that you get no refund at all. If you are getting one, it means that you’ve made an interest-free loan to the government and your money has been working for them — not you — all year-long.”

People often gripe that Uncle Sam already gets too much of their money. Why give him more?

Sure, a lot of folks try to justify their tax refunds by saying it’s a way to force themselves to save money. But Clark isn’t buying it.

“While I agree that saving money is a valid concern, I believe there’s a better way to accomplish that goal,” he says.

Adjust Your Withholding at Work

Here’s the consumer champ’s preferred alternative: Let’s say you typically get a refund of $1,200 every year. Try reducing your withholding at work by $100 a month. Then have your bank or credit union automatically transfer that $100 each month into a savings account.


You’ll never see the money, so you never miss it. But the end result is that you’ll build your savings and earn interest throughout the entire year.

In fact, we’ve got a list of high-yield online bank accounts that will pay you in excess of 1% APY right now.

Just talk to your human resources department or a payroll specialist at work to reduce your withholding going forward.

To make sure you’re as close to even-steven as possible, the IRS has a withholding calculator to help you decide just the right amount of money to have held out of every paycheck. This will help ensure that you meet your annual tax liability, but prevent you from crossing over into refund territory.

Bonus: You’ll Make Yourself Less Vulnerable to Tax Return Identity Theft

There’s another reason why bringing your refund down as close to zero as possible makes sense. If you do it, criminals won’t have any refund money to steal from you.

Having too much money held out of every check in anticipation of a big refund makes you a more attractive target for tax return identity thieves.

If there’s no refund, there’s nothing to steal!

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