Large Tax Refunds

Some individuals view a sizable tax refund as a method of forced savings.   Or as a belated Christmas gift.  Of course,  on the flip side, receiving a large tax refund means Uncle Sam or the State Equivalent held on to your money “interest free.”

Now with interest rates so low during this Great Recession, you’re not losing that much interest if Uncle Sam or the State Equivalent has your money “interest free.”  But another problem has surfaced during this tax year.

Many State Equivalents don’t have a lot of cash.  Thus these State Equivalents are not issuing refunds promptly.  I experienced this myself but didn’t realize it at first.

I mailed my tax return rather early (3rd week of February).  I waited patiently but no refund.   So over a month later, I called to check on the status of my refund.  When I spoke with a tax official, I was told there was a glitch on the government’s part.  But since I called to inquire, this tax official corrected the glitch and my refund would be issued within 5 to 7 days.

I called my tax preparer regarding my federal refund and mentioned in passing what the District of Columbia tax official told me.  My tax preparer responded – the District of Columbia Government is intentionally delaying the issuance of refunds (he had learned through the grapevine).  Once a taxpayer calls to inquire, a tax official provides a pseudo explanation (such as what I was told).

Nothing makes me ANGRIER than FIRST, Uncle Sam or the State Equivalent having my money “interest free” (something which I allowed but not claiming enough withholdings) and then SECOND, Uncle Sam or the State Equivalent delaying my refund.

In the hopes of avoiding this situation next tax year, I’ve increased my withholdings at the federal and state levels one each.  I hope I won’t have to write a check to Uncle Sam or the State Equivalent next year (if so, it should be small).  Or if I receive a refund, it should be small.

Plus, by receiving more money in my pay check today, I can make larger payments on my rental property’s mortgage and get rid of that mortgage sooner rather than later. A win-win situation.

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