By changing your withholdings, you are lowering your next refund (or possibly eliminating it altogether) and receiving a portion of that money in each paycheck during the course of the year.
The most common response to this argument is that the forced savings aspect of the tax refund is common due to a lack of discipline to save. Since you were used to living on the previous amount, simply sign up for a payroll deduction or funds transfer into a savings or money market account where the extra funds can accumulate and grow. One year later, you will have more money than the refund would have yielded due to the accrued interest.
Avoid Refund Loans
Nothing is more frustrating than watching television during tax season and seeing offers for tax filers to receive a refund on the spot. These “refunds” are a rip-off. There are too many options available to consumers to give away a large chunk of their refund just to receive cash the same day.
For example, those who file electronically and sign up for a direct deposit refund can have their money within two weeks. Short-term loans, term notes or even credit card advances may offer a lower interest rate than borrowing directly from the tax preparer. The annual interest rate on a “refund loan” is often in excess of 100 percent!
