Don’t Get Too Excited About Your Tax Refund

Around this time of year, I usually hear people boasting about how much money they are going to get back from their tax refund.  The problem with this is that you shouldn’t be getting back a huge refund if you are properly withholding your federal taxes.  Do you really want to give Uncle Sam a free loan on your money for an entire year?  Because that is what you are doing if you are letting the government take more taxes than are owed.  If you are getting back a big refund this year, make sure you readjust your W-4 with your HR department.  It’s much better to have that money go into your pocket every paycheck than let the government hold it for a year.  I understand that some credits and deductions aren’t factored into the W-4 deductions which allow you to receive a refund back, but if you’re getting a couple grand back from your refund this year, there is a problem.

Another piece of junk loan that comes up around this time of year is borrowing against your tax refund.  There really is no point for this.  Ask yourself this question.  Would you get a payday loan at one of those creepy loan shark places?  Well, the tax refund loan is very similar.  According to, the average refund of about $2,000 has an annual percentage rate of 200%.  Some taxpayers pay a fees for a tax refund loan equivalent to a 2000% annual percentage rate!  That is unbelievable, and the worst part is that these so-called “respected” tax refund specialist like H&R bloc and Jackson-Hewitt will target lower middle class families for these rip-off loans.  Don’t get sucked into these predator loans.  If you are that strapped for cash that you can’t wait two weeks for your refund, then your problem is lies somewhere else.

These are just a few things to consider this tax season.  I am in no way a tax specialist, but I did want to give you a heads up on tax refund loans and the problems of getting such a big return.