Why I Hate IRS Refunds


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In a few months, there will be a lot of people wondering where their IRS refund is. Or they may not quite be there yet with their tax return preparation and instead are just happy they are getting a refund.

I’m going to tell you something a little controversial right now. I don’t like IRS refunds. And I especially don’t like state tax refunds. In fact, I’m a little afraid of them in some states. Here’s why.

A tax refund is not a gift from the government. It’s actually the government giving you some of your money back. And they are giving you the money back without paying you any interest. When you consider credit cards are charging 30% or more per year in interest, the free gift of TOO MUCH tax money you’re making is pretty generous. It’s definitely not a cause for celebration on your part. It’s just your money that you’re finally getting back.

The only thing worse than planning to get an IRS refund would be planning to get a state refund. A state refund is the state giving you back your money, just like with the IRS. A state refund is an interest-free loan, just like with the IRS. But there is one more gotcha. This past year California ran out of money. Instead of refunds, they gave out ‘script’ which was a promise to pay. Sure, you could sell it and get dollars, but you’d have to give up a lot of the money to do it. In other words, you had to PAY to get your money back, interest free, from the state.

Is your state broke? Chances are the answer is ‘yes.’ More and more states are facing major deficit problems. Look for more states paying script when they run out of money.

As you’re planning your taxes this year, make sure you haven’t overpaid your state or federal taxes. Otherwise, you’re just handing your money over to the government for no good reason.

Filing Your Schedule C Tax Return

Filing Your S Corporation Tax Return

Tax Survival for 1099-A and 1099-C Recipients


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2 Comments so far:


On December 5th, 2011 | 12:46 pm
Joyce M Washington, CPA said:

could not agree with you more. great post!


On December 13th, 2011 | 9:49 am
M Berry said:

Funny, my mom always said that getting a refund is much better than paying. My opinion, try to get as close to zero monies refundable or due with your tax return. It could take a few years of practice, a good CPA, and some tweaking, but I really feel that this is the best way to deal with taxes in general.



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