A Closer Look at Your Tax Refund

Millions of Americans look forward to their tax refund each year.  But contrary to popular belief, it’s not a windfall you’re getting from the government.  If you’re filing your tax return early in anticipation of some serious cash, then maybe it’s time to rethink your attitude toward this annual tradition.

It’s Your Money

Although the IRS is the one writing the check, technically, you’re the one who’s paying for it.  Or rather, the one who’s already paid for it. Remember, it’s a tax refund!  An excess that you’ve given to the government through payroll withholdings, quarterly payments, etc.  In many cases, you control this amount by completing forms to indicate how many allowances you intend to claim.  Depending on your family size, employment classification, and other factors, this could be 1, 2, 3, 4–maybe even 0.

Many people err on the side of caution and opt to withhold more.  So, they don’t get an unwelcome surprise of owing money come April.  Unfortunately, a simple miscalculation could cause you to overpay thousands of dollars in taxes every year!  Therefore, we always recommend that you update your withholdings after consulting with an experienced accountant—like those on our team.

What’s the Harm?

We understand some of the appeal of the annual tax refund.  It may seem like a windfall, or a savings account you get to cash out at the beginning of each year.  Still, there are some definite drawbacks to having too much tax withheld throughout the year.

First of all, although some people treat it like a savings plan by funneling their money away, where they can’t get to it. In reality, there are much better ways to invest your money.  See, with actual savings or investment strategies, your money grows.  It builds interest and remains accessible.  Unlike your taxes, which then act as a loan—to the government, interest-free.

On top of that, millions of Americans sorely lack actual savings.  Whether that’s for an emergency car bill, medical expenses, or even a vacation. Without access to funds, more people are relying on credit cards to see them through.  You may think to yourself, “Oh, I’ll just put this on a card now and then pay everything off when I get my refund.”  But you’re forgetting one important detail:  interest rates.  Right now, credit cards have some of the highest interest rates in recorded history. With the average soaring to 17.47% at the beginning of 2019.  When you factor this is, not having $500 in emergency savings could actually cost you quite a bit more in the end.


Rather than put yourself in a position of having to choose, talk to one of our experienced professionals at ENSO Accounting.  Apart from preparing your tax return, we also act as advisors throughout the year.  Ask us to look at your withholdings or help to project your cash flow for 2019.  This won’t just change the way you look at your tax refund.  It could improve your financial standing overall! What’re you waiting for?