NGB Financial | Dec 11, 2023
For most taxpayers, getting a big refund feels good. According to the IRS, the average American received a refund of $2,860 in 2021. Awesome! That should cover the summer vacation or make a down payment on a vehicle. But wait, why you are getting this nice windfall? It’s because you gave the government an interest-free loan the previous year! Your paycheck was also about $250 less per month. If you had put that extra cash in a 401(k) and your company matched the contribution, you could have just doubled your money instead. Add in soaring equity markets, and you could possibly have picked up another 10% or so. On the other hand, if you end up owing money to the IRS at the end of the year you could have actually benefited from an interest-free loan from the government.
To reduce your refund for 2017, contact your employer’s payroll department and reduce your withholding. It can be a little complicated getting the calculations right, but the good news is you can make adjustments throughout the year. If it’s too confusing to ask your HR department for help.
