Tax refunds are bad

[bjl584]

This issue comes up from time to time. This article explains why getting a refund on your taxes is bad.


Why I hate income tax refunds - IRS & tax returns - MSN Money

[creditcardfree]

Good article.

[SnoopyCool]

And refunds are bad when you have a zero tax liability but receive a ginormous refund due to refundable credits, like EIC. Not bad for the person getting them so much as for those who are paying for them to get that refund.

[GREENBACK]

Those who pay attention to these kinds of things know refunds aren't a windfall you're getting from the gov't. I'm all for noboby getting a refund and all of us paying a flat rate but I guess that will never happen. It's amazing to me how simple minded people are in terms of these things.

[disneysteve]

Those who pay attention to these kinds of things know refunds aren't a windfall you're getting from the gov't. I'm all for noboby getting a refund and all of us paying a flat rate but I guess that will never happen. It's amazing to me how simple minded people are in terms of these things.

I was listening to a Disney podcast the other day. They had asked people to write in with ways that they save money throughout the year to afford their Disney vacations. One listener wrote and said that they have taxes over-withheld so they get a big refund and use that to pay for their trip. Comments like that make my head explode.

[nmboone]

DisneySteve- Did the podcast person in charge tell them, "Go away, think about what you just said, and then come back to us later, because you're an idiot."

[disneysteve]

DisneySteve- Did the podcast person in charge tell them, "Go away, think about what you just said, and then come back to us later, because you're an idiot."

Nope. It wasn't a personal finance podcast so a few people on the panel actually agreed that it was a good idea for people who have trouble saving money to do a forced savings like that.

[GrimJack]

Some of the people who use the IRS as an interest free bank is they are one step from using payday loans. Of course there are better ways, but there are way worse mistakes to make.

[baptiste.tyrell]

I made my SO read this…it will hopefully change his perception of refunds!

[disneysteve]

Some of the people who use the IRS as an interest free bank is they are one step from using payday loans. Of course there are better ways, but there are way worse mistakes to make.

Getting a tax refund is far, far better than taking a payday loan. One is just putting your own money away in an "account" earning 0%. The other is borrowing money at 200% or more interest. No comparison between those two options.

[Tonyall]

wow

It was interesting to see all the comments on that article. People were hot!

Of course, it is silly to give the government an interest free loan. On the other hand, with interest rates they way they are, and if you get hit with a penalty (a pretty sick and unfair system but that is another story), you lost your interest on the money and a lot more.

[scfr]

In defense of people who get refunds:

- For the self-employed, they may not have a choice. Estimated taxes are paid based on prior year's earnings. Some years you get a refund, some years you don't.

- Well, yes, some people really are "financial fools" (the author of the article's words not mine) and a tax refund may be the only way they are capable of saving. My brother who is developmentally-disabled uses his tax refund to pay for a trip or make a major purchase each year. Money that he has access to is going to get spent. Sad but unfortunately true. We could pressure him to have his withholding adjusted so that he got more money each paycheck, but then he would never save up enough to take a trip or buy a new bicycle.

Everything is relative. Tax refunds may not be the very best option, but sometimes they are the lesser evil.

[irmanator]

Nope. It wasn't a personal finance podcast so a few people on the panel actually agreed that it was a good idea for people who have trouble saving money to do a forced savings like that.

on the bright side, they didn't use a credit card.

[SteveBlissLaw]

I read this thread title and pite out my drink. I don't know about you but I love getting my tax refund lol

[steveaz67]

The only thing it's good for is when it acts like a forced savings plan. Otherwise.... it's just a free loan for Uncle Sam. Sad but true. Everyone I know is grateful when they get their check.