The Truth About Tax Refunds


Courtesy of USAA

We all know a tax refund means we paid too much in taxes.  But few of us seem to mind. 

IRS records show most of us have $40 too much taken out of our earnings every week. Why? We either don't know how many allowances to claim on our W-4, we'd rather overpay than write a check to the feds on April 15, or, we see it as an easy way to set aside funds for a vacation or big-screen TV. 

But tax experts advise that the best thing to do is take home more of our pay and use it to slash debt or invest for the future. If you'd rather put your money to work for you, here are a few tips to help you get started:

Make the right claimThe number of allowances, you claim on your W-4 tells your employer how much tax to withhold from your paycheck. If you received a big refund last year, chances are you didn't have many. If you owed money, you probably claimed too many allowances.

"Sure, there are good reasons for wanting a refund. Young families, for example, often don't have a lot of money so they like to get that lump sum for a down payment on a house or car," she says. "But if you sit down with someone who does financial planning, you can figure out a way to meet your goals without giving the government an interest-free loan."

And that, tax mavens agree, is the ultimate payback for hard work.

For more information or free financial advice, visit 

USAA means United Services Automobile Association and its affiliates.


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