The middle of November is not a very popular time to talk about tax refunds; unless, of course, you closely follow politics and are anticipating substantial change through tax reform. Nevertheless, it is still important to think about your tax return during this time of year in terms of the interest free loans that you may be giving to the federal government because of the withholdings from your regular paycheck.
It is a common norm that taxpayers who have too much withheld in taxes through their monthly (or weekly) paychecks stand to receive a refund after they file their annual return. This brings about a highly debated question: is it better to receive an income tax refund or a larger paycheck?
It may go without saying that most people prefer their annual refund. To them, it amounts to an extra paycheck that they can add on to their regular earnings. The additional money could pay off past due bills, fund a vacation or simply provide peace of mind and pad one's bank account. The fact that they are giving away interest free loans to the federal government is of little consequence given the favorable outcome.
Could this preference be rooted in the fear of owing money to the federal government if taxes weren't paid incrementally? Perhaps it could also be based in the lack of motivation of carefully tracking expenses and income to ensure the proper tax is paid each month (or quarter).
Regardless if the reasoning, two things are constant. First, people across multiple earning levels appreciate getting a refund from Uncle Sam; so much so that they would prefer a refund over a larger paycheck. Second, no one likes owing the government money at tax time.
An experienced tax law attorney could help you avoid that misfortune.
The preceding is for informational purposes only and is not legal advice.