What is a major disadvantage of getting a big tax refund?

Answer 1

The major disadvantage of getting a big tax refund is that you are giving the IRS and/or your state an interest free loan of your money when you could be using it for whatever you wanted to do with it. But it is also a way of forcing yourself to save by putting extra withholdings where you can't touch them until the tax year is over. It is good for someone who isn't sure that they would be disciplined enough to have less taken out of their paycheck and put that difference into a bank account or investments. I do the same thing each year and get a big tax refund myself. It is nice to have filled out your tax return and know I'm getting money back, even though it's only my own money that I'm getting back. Now if you're getting a big tax refund because of Earned Income Credit then you're not getting your own money back, but free money from the IRS.

Answer 2

Large Tax Refund

Answer 3

Getting a big refund means that too much money is being withheld from your paycheck. If you were to reduce your withholding, your refund would be smaller but you would enjoy the use of your money throughout the year instead of letting the government keep it (and collect its interest) until tax time.

Answer 4

Disadvantage - You get smaller paychecks because more tax is taken out. You can change your exemptions to a higher number with your employer to change that (claiming 0 means they take the most out, claiming 9 they take way less out but you may end up oweing at the end of the year) The IRS doesnt care what you choose to deduct from paychecks, they get their money in the end either way..

Advantage - You get a big heap of money all at once without having to save it yourself and you can irritate the heck out of the bank by cashing that five figure check out all in ones

Answer 5

The only real disadvantage is there is no interest paid on that money. Personally I could care less you don't get that much if it was in a savings account anyways. I like the refund its extra money for me to buy something I really need for the house.

Answer 6

The disadvantage of getting a big refund is that you gave the government too much of your money and they have been using it, investing it, and making it earn interest for them all year. When you get it back, it's without any of the interest the government has earned from it.

Ideally, you break even on your return. You don't owe anything, and they don't owe you anything. That means you have kept more of your money, and hopefully invested some of it.

Answer 7

You simply gave the gov. an interest free loan. Don't get all excited. But since you have one, pay down all of your debt, then contribute to a Roth IRA only if you have a 401(k) plan or other plan at your job. If not, then I would suggest a traditional(tax deferred).

Answer 8

The biggest disadvantage is that you allowed your money to be used by the Federal and/or State Government free of charge. You could have invested that money each paycheck and earned interest on it.

Answer 9

you put yourself under a magnifying glass because once you get a refund, uncle sam would want to know why and how come? thus be ready with the supporting stuffs if you want a large refund.

Answer 10

It means that you pretty much lived on nothing for a whole year because your paychecks were taxed to death!