Common Misconceptions When Getting a Refund From The IRS
People jump for joy when they get their tax refunds, and why wouldn't you?! A check from the government is a great feeling.
Especially when it's us normally cutting the checks to them...
A few weeks ago I created a TikTok account. I simply couldn't hold off anymore. I'd watch my wife's favorite videos and those people on there are flat out hysterical!
But as I've been scrolling through all of these videos, lately, I see quite a few showing people buying xbox ones, new purses, or just making a big Target run with their IRS refund check.
What, I think, a lot of people don't realize, is that is your hard-earned money.
That's not the IRS just paying you for being a good citizen and filing your tax return on time.
They are basically telling you that you paid too much money to them throughout the year, so they are giving your money back to you.
If you are a salaried employee, you have income tax withheld from every one of your paychecks. If you are a small business owner, you're supposed to make quarterly estimated tax payments to ensure you pay your tax evenly throughout the year.
If you are getting massive refunds, you are essentially giving the IRS an interest-free loan throughout the year.
That's right. The IRS is taking that money each paycheck, and investing with it.
All the while you're stuck with a direct deposit lower than it should've been, only to finally get that money back come tax season.
The game each year is how close to $0 can we get on our tax return.
No refund, no tax payment. Just $0 owed.
That way, you are keeping the appropriate amount of your earned income throughout the year, and paying the IRS the appropriate amount for their cut as well. Doing this will allow you to accurately budget throughout the year, and will also help prevent those unnecessary purchases each tax season.
Now, this is a lot easier said than done. I still have trouble with it, but this is the mindset you should have when you consider your tax situation.
The point is, do not let a large refund from the government make you think that's free money.
Or, maybe just think twice before buying that new peloton.
(I mean, treat yo self, but you know what I mean)
Here's to making money, and keeping that money!