We ask 11 experts: Would you rather get a tax refund or owe money?

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By

Hanna Horvath, CFP®

Hanna Horvath, CFP®

CERTIFIED FINANCIAL PLANNER™ & Managing Editor, Growth

Hanna Horvath is a CERTIFIED FINANCIAL PLANNER™ and managing editor for growth at Policygenius. She helps produce the Easy Money newsletter, and owns all growth initiatives for Easy Money. She recently passed her exam to become a certified financial planner in November 2020.

Hanna's work has appeared in NBC News, Business Insider and Inc. Magazine. She is regularly quoted in top media outlets, including CNBC, Best Company and HerMoney. She has also appeared on the Money Moolala podcast and All's Fair podcast.

Prior to Policygenius, Hanna wrote for KNBC in Los Angeles and WNBC in New York. When she isn't writing, she's (often) running, (usually) cooking and (sometimes) doing photography.

Published December 3, 2020|3 min read

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You can't avoid taxes. Whether you’re in for a pleasant or shocking surprise come April 15 depends on how much you withhold throughout the year. You can have your employer set aside a certain amount for taxes each paycheck, or, if you’re a contractor, you can set the money aside yourself. It can be extremely difficult to know exactly how much to set aside in taxes in a given year, but if you do the math correctly, you should neither owe nor receive money.

But that rarely occurs. What typically happens is: If you paid too little in taxes out of your paycheck during the year, then you may owe taxes. If you paid too much, then you may be eligible for a refund. While it may feel nice to get bonus money, that money isn’t really a bonus — it’s an interest-free loan you gave to the government all year. The average tax refund this year was $2,476, according to the IRS.

We asked 11 certified financial planners if they would rather owe taxes or get a big refund. Most said they would rather owe money.

Q: Would you rather owe taxes or get a big refund?

Why some experts say it’s better to owe money

“Provided that I have planned for it and am not surprised by it, I would rather owe taxes on April 15. A refund feels nice in the moment, but it means you've overpaid during the year and given the government an interest-free loan.” Ron Guay, certified financial planner at Rivermark Wealth Management

“I know a lot of people enjoy getting a huge tax refund every year, but that's simply a return of over-withholding taxes from yourself over a 12-month period the year prior. It doesn't make any sense to ‘lend’ the government your money when you could be utilizing it better for yourself. Ultimately, I try to get as close to zero as possible when it comes to my tax return.” Serina Shyu, certified financial planner at Delta Community Credit Union

“I will always choose a shortfall over a refund. I want my money in my control over the course of the year. The current pandemic only amplified the importance of having access to money. Have a plan for taxes, keep more of your money and create the financial security you deserve. No one else is expected to lend money for free with the inability to call the loan early except tax payers!” Brent Weiss, certified financial planner at Facet Wealth

Why some experts say it’s better to get a refund

“A small refund is ideal. I'd rather owe than have a large refund, assuming the amount I owe is small enough to avoid withholding penalties.” Justin Rucci, certified financial planner at Warren Street Wealth Advisors

“In a perfect world I would love to have neither, but if forced to choose I'd rather have a big refund. I would rather not have to scramble to come up with money to pay for taxes.” Carl Holubowich, certified financial planner at Armstrong Fleming & Moore, Inc

Here’s how to know if you’ll get a tax refund this year.

Image: Nastia Kobzarenko

CERTIFIED FINANCIAL PLANNER™ & Managing Editor, Growth

Hanna Horvath, CFP®

CERTIFIED FINANCIAL PLANNER™ & Managing Editor, Growth

Hanna Horvath is a CERTIFIED FINANCIAL PLANNER™ and managing editor for growth at Policygenius. She helps produce the Easy Money newsletter, and owns all growth initiatives for Easy Money. She recently passed her exam to become a certified financial planner in November 2020.

Hanna's work has appeared in NBC News, Business Insider and Inc. Magazine. She is regularly quoted in top media outlets, including CNBC, Best Company and HerMoney. She has also appeared on the Money Moolala podcast and All's Fair podcast.

Prior to Policygenius, Hanna wrote for KNBC in Los Angeles and WNBC in New York. When she isn't writing, she's (often) running, (usually) cooking and (sometimes) doing photography.