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Would you prefer a larger paycheck or a bigger tax refund?

At the end of October, it is not very common to talk about tax refunds. Let’s face it, more people are concerned about what their kids are going to wear to go trick-or-treating.  This apathy about taxes must frustrate financial advisors around this time of year, especially clients who do not heed warnings about giving interest free loans to the federal government because they allow too much withholding through their paychecks.

Indeed, taxpayers who pay too much through their withholdings will eventually receive a refund in 2017. This brings about the ages old question of whether it is better to have larger regular paychecks or a tax refund every year.  

Most people prefer getting a refund, according to a bankrate.com survey. The fact that they are giving away interest free loans to the federal government is not really a concern. Indeed, the annual present of a financial windfall is worth the interest that they are foregoing.  

Perhaps this preference is based on workers hedging their bets that they will not owe taxes if they sacrifice a little on each paycheck. After all, owing taxes is definitely more troubling that receiving a refund.

It’s not surprising that people who don’t make a great deal of money would look forward to a refund, but the survey also found that Americans across a number of earning levels would prefer a larger refund over a larger paycheck.  

Regardless of your preference, it is no fun owing the government money during tax time. An experienced tax law attorney could help you avoid that misfortune. 

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Law Offices of Robert T. Leonard, APC

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