[{"@context":"http:\/\/schema.org","@type":"Article","name":"Tax Refund Pros and Cons Article","articleBody":"Every year, the IRS issues over $400 billion in tax refunds.  That\u2019s a lot of money \u2014 money that arguably would have been best left in taxpayers\u2019 pockets to begin with.  While it\u2019s exciting to receive a large tax refund, it\u2019s important to understand that there are definite pros and cons to receiving one.  Before we get into the specifics of the benefits and downsides of receiving a tax refund, though, here\u2019s what you need to know: tax refunds are an industry in and of themselves.  The Tax Refund Industry Between January and April every year, there\u2019s a pop-up industry that has become a part of our collective American culture.  It\u2019s called the tax refund industry.  This industry tells you that:  tax refunds are awesome and therefore the bigger your refund, the better. This industry has two major players: tax preparers and big-box retailers.  Tax Preparers Both tax software companies and walk-in tax preparation offices have the same guarantee: \u201cWe\u2019ll get you the biggest refund, guaranteed!\u201d  And while their products and services should help you to maximize your legal tax deductions to prepare your tax return correctly, shouldn\u2019t the promise rather pertain to accuracy rather than the size of the refund?  It\u2019s almost an assumption that when you file your taxes you will receive a refund \u2014 rather than break even or have a tax due \u2014 and tax preparation companies milk this for their marketing.  Check it out: Here\u2019s our review of the popular TurboTax software.  Retailers It\u2019s no secret that many retailers work Americans\u2019 proclivity to impulsively spend their tax refunds into their own marketing and sales forecasts.  In 2019, for example, online home goods retailer Wayfair held a 36-hour-sale beginning on April 10.  Clearly, the company was expecting that people would have money in their pockets thanks to their tax refunds.  In fact, oftentimes the tax preparers and the retailers work hand-in-hand to main the \u201crefund culture\u201d this time of year.  For example, Jackson Hewitt \u2014 the walk-in tax preparation company that maintains over 3,000 offices within Walmart stores \u2014 is offering its customers a 5% bonus for putting their tax refund on a Walmart gift card.  Just imagine that: someone walks into the Jackson Hewitt office in a Walmart and then walks out with their $1,000 refund on a Walmart gift card, ready to spend right away!  Tax Refund Pros 1. A tax refund is a forced savings account. If you\u2019re not the best with maximizing your savings, a tax refund could be a good way for you to force yourself to save throughout the year.  The trick, of course, is to actually save your refund check rather than spending it.  2. Getting a tax refund minimizes penalties. The IRS likes to be paid on time and on a quarterly basis.  And if a taxpayer doesn\u2019t pay their taxes on the IRS\u2019 schedule, the IRS will assess penalties for underpayment of taxes.  But if you get more taxes taken out of your paycheck every pay period than is necessary \u2014 which is what causes a tax refund in the first place \u2014 then you can rest assured that you won\u2019t have this problem with the IRS.  Tax Refund Cons 1. You\u2019re giving the government an interest-free loan. If I asked you to loan me a few thousand dollars, interest-free, for the next six to twelve months, you\u2019d say I was crazy.  But if you get a large tax refund, this is exactly what you are doing for Uncle Sam throughout the year.  A tax refund isn\u2019t free money from the government; it\u2019s your money that you let the government do with as it pleases until you file your tax refund and receive your refund check or deposit.  2. You don\u2019t have the money to use throughout the year. Since the government has your money, and you don\u2019t, you don\u2019t have the option of using it throughout the year to reach your other financial goals.  Here are some things that you could be doing with your would-be tax refund money if you had it at your disposal throughout the year:  Paying down debt to avoid interest Investing in the stock market and earning a return Depositing it in a savings account to earn interest 3. A tax refund is a temptation. For many people, a tax refund feels like a windfall \u2014 an unexpected stroke of good fortune.  And as with most windfalls, the temptation to spend your tax refund is strong.  Or maybe you aren\u2019t tempted to spend all of it, but it certainly doesn\u2019t feel like much to blow $300 of your $3,000 refund, right?  The magnitude of a tax refund can trick you to make poor decisions with at least a portion of it.","description":"This article covers the pros and cons of tax refunds.","dateModified":"2020-06-13","datePublished":"2020-01-25","headline":"Tax Refund Pros and Cons: What Are the Downsides of Receiving a Tax Refund?","image":"https:\/\/moneydoneright.com\/wp-content\/uploads\/Tax-Refund-Pros-and-Cons.jpg","mainEntityOfPage":"https:\/\/moneydoneright.com\/taxes\/personal-taxes\/tax-refund-pros-and-cons\/","publisher":{"@type":"Organization","logo":{"@type":"ImageObject","url":"https:\/\/moneydoneright.com\/wp-content\/uploads\/Money-Done-Right-Personal-Finance-and-Investing-Blog.png","name":"Money Done Right Logo","height":"488","width":"60","@id":"https:\/\/moneydoneright.com\/#ImageObject"},"address":{"@type":"PostalAddress","name":"Money Done Right Address","addressCountry":"United States","addressLocality":"Valencia","addressRegion":"California","postalCode":"91354","streetAddress":"23890 Copper Hill Dr Ste 139","@id":"https:\/\/moneydoneright.com\/#PostalAddress"},"url":"https:\/\/moneydoneright.com\/","publishingPrinciples":"https:\/\/moneydoneright.com\/methodology\/","additionalType":"Blog","name":"Money Done Right","email":"support@moneydoneright.com","sameAs":["https:\/\/twitter.com\/moneydoneright","https:\/\/www.facebook.com\/moneydoneright\/","https:\/\/www.instagram.com\/moneydoneright\/","https:\/\/www.linkedin.com\/company\/money-done-right\/","https:\/\/www.pinterest.com\/moneydoneright\/","https:\/\/www.youtube.com\/c\/MoneyDoneRight"],"foundingLocation":"https:\/\/en.wikipedia.org\/wiki\/Santa_Clarita,_California","legalName":"Allec Media LLC","naics":"519130","parentOrganization":"https:\/\/moneydoneright.com\/#ParentOrganization","founder":{"@type":"Person","hasCredential":["https:\/\/cslainstitute.org\/","https:\/\/en.wikipedia.org\/wiki\/Certified_Public_Accountant"],"url":"https:\/\/moneydoneright.com\/author\/logan-allec\/","spouse":"https:\/\/moneydoneright.com\/author\/caroline-allec\/","image":"https:\/\/moneydoneright.com\/wp-content\/uploads\/2020\/01\/Logan-Allec-Money-Done-Right.jpg","name":"Logan Allec","description":"Logan Allec is a practicing Certified Public Accountant, Certified Student Loan Professional, and the founder of personal finance blog Money Done Right.  He provides a second level of review for the site\u2019s more technical articles, particularly those pertaining to taxation, credit, and student loans. He also educates thousands of people every week on The Money Done Right Show.","email":"logan.allec@moneydoneright.com","sameAs":["https:\/\/loganallec.com\/","https:\/\/twitter.com\/loganallec","https:\/\/www.benzinga.com\/author\/logan-allec","https:\/\/www.facebook.com\/logan.allec","https:\/\/www.fareverse.com\/writer\/logan-allec-cpa-freelance-writer\/","https:\/\/www.instagram.com\/loganallec\/","https:\/\/www.legalzoom.com\/author\/logan-allec","https:\/\/www.rent.com\/blog\/author\/logan-allec\/","https:\/\/www.thebalance.com\/logan-allec-5192331","https:\/\/www.youtube.com\/channel\/UC3Jg7eUCBPsjX13X7kTW1hQ"],"familyName":"Allec","givenName":"Logan","birthDate":"1988-08-04","birthPlace":"https:\/\/en.wikipedia.org\/wiki\/Anaheim,_California","alumniOf":["http:\/\/www.ucla.edu\/","https:\/\/en.wikipedia.org\/wiki\/Ernst_%26_Young","https:\/\/www.usc.edu\/"],"gender":"Male","jobTitle":"Founder","nationality":"https:\/\/en.wikipedia.org\/wiki\/Americans","worksFor":{"@id":"https:\/\/moneydoneright.com\/#Organization"},"@id":"https:\/\/moneydoneright.com\/author\/logan-allec\/"},"@id":"https:\/\/moneydoneright.com\/#Organization"},"hasPart":{"@type":"FAQPage","name":"Tax Refund Pros and Cons FAQPage","mainEntity":["https:\/\/moneydoneright.com\/tax-refund-pros-and-cons\/#Question","https:\/\/moneydoneright.com\/tax-refund-pros-and-cons\/#Question1","https:\/\/moneydoneright.com\/tax-refund-pros-and-cons\/#Question2"],"@id":"https:\/\/moneydoneright.com\/tax-refund-pros-and-cons\/"},"author":{"@id":"https:\/\/moneydoneright.com\/author\/logan-allec\/"},"@id":"https:\/\/moneydoneright.com\/taxes\/personal-taxes\/tax-refund-pros-and-cons\/#Article"},{"@context":"https:\/\/schema.org\/","@type":"BreadcrumbList","itemListElement":[{"@type":"ListItem","position":1,"name":"Taxes","item":"https:\/\/moneydoneright.com\/taxes\/#breadcrumbitem"},{"@type":"ListItem","position":2,"name":"Personal Taxes","item":"https:\/\/moneydoneright.com\/taxes\/\/personal-taxes\/#breadcrumbitem"},{"@type":"ListItem","position":3,"name":"Tax Refund Pros and Cons: What Are the Downsides of Receiving a Tax Refund?","item":"https:\/\/moneydoneright.com\/taxes\/personal-taxes\/tax-refund-pros-and-cons\/#breadcrumbitem"}]}]