Why are people happy to get an income tax refund?

Question

Think about it: the reason you get a refund is because the government took too much of your money way from you. You gave the government an interest-free loan. If you'd had that money up-front you could have been earning interest on it.

Answer 1

Because they are incapable of saving their money - having the government "save" it for them is the only way they get a big lump of money all at once.

I'm betting they don't save that, either...but spend it within 30 days...

Answer 2

That's true - that's why it's called a refund. But in the middle of the year, most people are too busy spending their paychecks and they don't know whether they are paying too much to the IRS or if they are short. It's good to knowat tax time if you overpaid and you can get that money back in 1 lump sum! And as for some people, like those who qualify for the Earned Income Credit (EIC) - they even get free money from the government!

Answer 3

People are happy because it was unexpected money. Happiness is often the result of a pleasant surprise rather than of "optimal outcome".

This phenomenon is related to the idea that "ignorance is bliss" - the person never knew the government was getting more than their share, so they were not unhappy, and then the discovery of unexpected dollars results in happiness.

Also, consider this: the average person who gets maybe $500-$1000 in refund probably only gave up about $20-$40 in interest over the course of the year, depending on rate of return. In the grand scheme of things, it is a small price to pay for a pleasant surprise in the spring. (In fact some people's "return" might be eaten completely up by transaction costs of brokers or bank fees if they were to invest a very small amount of overwithholding each month.)

Answer 4

That is correct. Basically, your return is money that you loaned the government interest free.

If you received a large refund, it is best to change your withholdings rate. However, you do take the risk of owing the IRS at the end of the year if your status changes at all during that year.

This is a good way to save money, of course interest free, if you have problems saving money that you have access too.

What you should do is open a Money Market account and start with a deposit of at least $2500.00 (some banks require more, some less).

Answer 5

You are right, but most people don't see it that way. Most people do not know how to save so this is almost like a forced savings for people. If they had that extra $20 a week, they would just nickle and dime it. But by getting a big refund they can make a big purchase once a year.

I personally always try to make my tax refund/due to be as close to 0 as possible each year.

Answer 6

The pre-tax benefits can never hurt your tax refund. This amount lowers your income subject to tax. Is the $24,108 before or after the benefits. If before you need to lower your income subject to tax to $20,755 and then estimate your refund.

Answer 7

This is only about half true in my eyes. For example you factor in EIC (Earned Income Credit) and someone that paid in $2000 can get upwards of $5000 back...so not only are they getting back their money but some of yours too!

Any time anyone gets money they are happy...it is what it is and money is what makes the world go around.

Answer 8

It's money from the government. What else is better? lol.

And it's like money you saved throughout the year that you couldnt touch. Gives people a sense of getting something they couldn't have until this time of the year? I dont know.

Answer 9

You are right, however most people do not see that, and they are happy to get the money in a lump sum in the middle of the year

Answer 10

How many questions here ask what their refund is going to be?

When was the last time you saw someone ask how much their total tax would be?

enough said????? ;-{