Many people fear tax day on April 15. This date is special for me because my granddaughter was born on tax day. But most people dread this day of accountability because they might owe the IRS a bunch of money.
In a recent Money Mastery class I taught, I asked the class members how many got a tax refund each year? Many hands went up, so I tested them for understanding. I asked them how they felt getting money, rather than paying? As expected, each person who had received a refund said it made them very happy. My follow up question was to ask how much of a refund they received. The answers averaged $4,200 per family. WOW! That’s a lot of money that sat in IRS coffers all year that these people were unable to use themselves for their own benefit… remember, this is their money, they just gave it to the IRS to use all year instead of using it themselves.
Here’s how the numbers work, in general: $4,200 divided by 12 months = $350 each month they over-paid in taxes.
I explained to class members that if they would go to www.irs.gov and use the W-4 calculator to see how many exemptions they should claim in order to pay just the right amount of taxes all year, then of course they would not receive the $4,200 refund. Then I 
asked which they would prefer to have, $350 more each month, or the $4,200 in the spring each year? Unbelievably, 100 percent said they would rather get the $4,200.
That’s when things got fun for me. I began explaining the numbers on the board this way:
- Use the $350 per month to pay down a 22% interest rate credit card with a $5,600 balance.
- If the $350 was used each month, it would pay $77 of principal on the card, thus eliminating $924 off the balance.
I then asked the class the question: Would you like to have paid off $924 more debt or receive the $4,200 in the spring? They all said they wanted that “extra $924!” And they said it with gusto.
As you read this, if you do get a large tax refund each year, I suggest you take a good, hard look at this. A tax refund is not a nice little bonus check the IRS is giving you each year. It isn’t “magical money” you look forward to getting so you can take that neat vacation, or buy some new consumable. It is your money you are giving to the government to use that earns them interest, not you. It is wasted money. It is money you are not using all year to pay down debt or to create savings categories in your Spending Plan, or to invest in something that earns you interest. It is money that you 
likely use as a lump “fun money” sum in the spring instead of paying the right amount of taxes as you go so you have full use of your own money to help get yourself out of debt, and controlling your spending.
Don’t give your money to the government to use all year. Do the wise thing and get online to calculate how much you need to pay all year so that you don’t receive a refund but don’t have to pay any or much on April 15. Make that day a great day, even if you do not have a beloved granddaughter for whom you celebrate a birthday!
