For some people it's the most wonderful time of the year; getting that big tax refund. But that big refund could be costing you money.
“It would make more sense to get that money every paycheck rather than hold that money out to the end of the year,” says Kaylee Morrison, a tax preparer with Liberty Income Tax in Harrisburg.
“The IRS has your money all year long,” adds Liberty's Deb McCreary. “So if you think about it, you're not getting interest, you're not earning anything and you're not being able to use your money.”
Financial consultant Kevin Kohler of Today for Tomorrow Inc. said the IRS reported that the average refund in 2011 was around $3,000. What would happen if the average person would invest that $3,000 instead of letting the government sit on it?
“The market's pretty stable and it's returning to a norm,” said Kohler. “So it's 8 to 10 percent on market investments. But if we just use 6 percent over 10 years, that's over $50,000 in money accumulated over 10 years.”
And he said some people look forward to a big refund while using their credit cards to pay for things.
“Unfortunately some of them are spending money throughout the year, more than they should, credit card bills, or whatever and come tax time I'll get a big refund and pay it off,” Kohler said.
If you want less money withheld from your paycheck, you should claim more exemptions on your W-4 form.