Ah, the tax refund. There are few times of year when personal finance enthusiasts and other Very Serious People feel as much smug satisfaction as they do in seeing the (unwarranted?) glee in their friends’ and neighbors’ faces upon receiving a big tax refund.
This smugness comes because receiving a refund after filing a tax return implies that you overpaid during the year, and if you had instead put that over-payment into a savings account, you could have made a little bit of interest income instead of letting the government hold onto that money for you for free. THIS IS A BIG DEAL!
As I put the finishing touches on my own taxes for 2013, it looks like I’ll be getting a little bit of a refund too — not the biggest one out there and certainly not as big as the refund I got last year for the 2012 tax year, but it’s there nonetheless.
Here’s why I’m still pretty happy about it.
Taxes are hard
My taxes are a little more complex than the average person, but I think everyone out there can agree that taxes aren’t the easiest thing in the world to figure out.
Even when professionals are tracking your taxes year-round, they can still make mistakes that they don’t find until the last minute. And even if they don’t make mistakes, estimating everything so that you owe exactly nothing at the end of the year is still pretty tough.
Either an exemption that you’re not entitled to or a deduction that you thought you were getting but aren’t, can mean the difference between getting a small refund and owing a pretty sizable amount.
Yes, if things do go your way and you end up with a $500 refund, you’ll feel a little silly about not earning any interest on that money during the year. But if things don’t go your way and you end up owing $500, that can make for a very bad month or two. And if your finances are already out of order, having to come up with $500 quickly can be pretty catastrophic.
Interest rates aren’t that great
So that $500 refund; even in the best-case scenario, I could have only made about $5 in interest throughout the year.
Are you really gonna spend all week acting self-righteous because I missed out on $5 worth of interest?
Get a hobby — some hobby that doesn’t involve acting like a clown.
It shows that I’m a human being
A refund of $500 at the end of the year breaks down to about $20 per paycheck. Yes, I’m definitely not the sort of person who would turn down $20 every couple weeks, but it’s easy to ignore those little losses.
Meanwhile, you know who feels pretty great about getting $500 all at once?
Every human ever.
Someone tell me I’m wrong.
Oh, and everyone: Have a nice week 🙂