Getting a big tax refund at the end of the year is a good thing…Right?
Don’t feel bad if you agree with that statement. That’s what many Americans have been led to believe, but you’re actually making a pretty big sacrifice by taking a big refund at the end of the tax year. In this article, we’re going to cover what you’re potentially giving up by waiting to get that big refund until after you file your return.
The average American typically receives a tax refund of $2,700, according to the latest IRS data for 2019 tax returns. Let’s break down what that $2,700 you’re getting back actually means. The most important thing to realize is that it’s actually your money. If you’re like most people, then you’re withholding taxes on your paycheck each period. When you submit your W-4 to your employer, they do their best job of estimating how much taxes you should withhold. The problem is that most of the estimates aren’t very accurate. And when you withhold too much, you’re giving the IRS an interest-free loan to money that you could have in your pocket right away.
Let’s look at how much you could be saving with Payboost using an example. $2,700 per year, the average annual refund, divided by 12 months per year, comes out to an extra $225 per month that you could have in your pocket by using Payboost instead of waiting to get it when you file your return. If you currently have a credit card that you’re paying off, you might be paying close to 30% interest on that card annually.
Let’s say you have to take a loan out for $225 a month since you don’t have the cash to pay bills and you don’t have Payboost. If you can’t pay off the loans, over the course of the year, you would accrue up to $481.60 in interest, which would continue to increase until you paid off your loans in full. However, if you were to use Payboost to get that extra $225, you could entirely avoid these interest charges. As it turns out, a big tax refund isn’t actually a good thing at all.
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