Avoid giving the government a tax-free loan

Published: Jan. 26, 2022 at 7:06 AM EST
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RICHMOND, Va. (WWBT) - Everyone looks forward to a tax refund during tax season, but should you? Rachel DePompa explains why some experts say getting a big refund from the government is not always in your best interest.

A lot of people actually look forward to filing their taxes this time of year, in hopes of a big refund check. However, Michael Joyce with the financial firm Agili says while that refund could be considered a sort of forced savings, it’s really just the government giving you back the money you earned with no interest.

“You could have been doing other things with those funds. In essence, you’ve given the government a big zero percent loan for a period of time when you could have been earning money on that in a savings account,” Joyce said.

He says you could have been investing that money. If you withhold just enough where you don’t get a large refund at the end of the year, that means you are getting more money back in each paycheck.

Joyce says the key to withholding for taxes is to get as close as you can to what your tax liability is going to be. He says it’s not good to withhold too little or too much.

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