The fear of owing taxes is one reason many taxpayers overpay during the year, according to Motley Fool. After all, the logic goes, it’s a far more pleasant experience to get a refund than suddenly have to cough up cash to pay the IRS.
The problem, though, is that people are far better off owing money than getting refunds, and here’s why: The bulk of Americans are extremely financially insecure. An estimated 57 percent of U.S. adults have less than $1,000 in the bank, while 39 percent have no savings at all. By limiting the amount of money we bring home each pay period, we’re putting ourselves at greater risk to incur more debt ― and with more debt comes interest charges.
Although many filers do use their refunds responsibly, a good chunk don’t. They see the money as “free cash” and an opportunity to splurge. In reality, a tax refund is just your money that you failed to collect up front, and you’re just getting it back from the government with no interest accumulated.
