People love a tax refund. And why not? About 75% of taxpayers get one. The typical amount is around $3,000. That’s a nice little E-transfer or check in your mailbox every spring.
A third of taxpayers say they actually like or love doing their taxes, and they most often cite the refund as the reason, according to a new survey from Pew Research. Those who enjoy doing their taxes also say it gives them a sense of control and of fulfilling their duty to pay their fair share.
Still, more than half of taxpayers say they hate or dislike doing their taxes, and they most often cite the complicated and time-consuming nature of the exercise. It’s the hassle they mind, not the tax itself. Fewer than one in 10 say they hate or dislike filing taxes because they owe money or feel over burdened.
(MORE: The 6 Most Common Tax Time What-Ifs, Answered)
The problem with refunds—and with liking them so much—is that the check isn’t really a bonus. It’s your money and always has been. You get the check because over the course of the year too much was withheld from your paycheck. The government has been holding this excess withholding, interest free, for up to a year—and now you get to have it back.
So the annual boost is the result of a mistake, not a reward for dutifully going to work every day and filing your taxes on time. Sadly, it’s those that can least afford to lend the government money interest-free that do it the most. Pew found that households with the lowest incomes are most likely to look forward to doing their taxes, suggesting that they are most likely to get a refund—which further suggests that they are doing the poorest job of managing their withholding.
Being over withheld may not seem like a big deal. Especially now, with interest rates so low, it’s not like having $3,000 in the bank will kick off much income. If you were collecting 1% in a savings account it would be a lot. That’s a measly $30 a year.
(MORE: The Hidden Cost of Tax Refunds)
Meanwhile, there is an upside to being over withheld. This is an imprecise science, and if you are on a tight budget getting a refund sure beats the alternative: having to come up with the money for a tax payment on April 15. It’s also a form of forced savings. Would you be able to put away that $3,000 on your own? If not, this is good way to find the funds to start an emergency fund or pay down debt.
On the other hand, saving is really no harder than being over-withheld. Talk to your employer about adjusting the withholding rate and have the difference automatically dropped in a retirement or some other account. And while the income is meaningless, $3,000 may be just the cushion you need to maintain minimum bank balances or allow you to stay current on payments that would otherwise result in late fees. That can add up to meaningful savings. Besides, taking control of your money is just good practice.