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Is Getting an IRS Refund Like Winning the Lottery?

Posted November 21, 2012 by Belinda Mills to Taxes 0 0
This post was written by a EasyFinance.com Community member. The views expressed below may not reflect the views of EasyFinance.com.

Nobody looks forward to filing taxes but many of us love the outcome: an IRS tax refund. For lots of taxpayers, tax season means getting back some of the money we put in the federal government's tax coffers. It's called withholding, which and it simply means money that was taken out of paychecks all year long. The money is meant to pay your portion of Social Security and Medicare in a pay as you go system. But sometimes you pay too much as you go, so you get some back after you file you tax return.

The IRS Refund

For this reason, tax season means a fat check for some taxpayers. The IRS refund is something anticipated by some taxpayers and also something that's eyed greedily by retailers. That's because they know lots of taxpayers will be getting IRS refunds which amount to something like an extra paycheck for some. They compare it to winning the lottery: it's free money! Retailers will try and take advantage of this and convince people to spend their refund on something they don't really need. A large-screen TV, a cruise, a new wardrobe...these are all examples of tax season advertisements aimed at those getting a refund.

Is it Really Like Winning the Lottery?

Is getting an IRS refund really like winning the lottery? Well, first of all, it is your money that you made by working a job. You earned it so it isn't a gift from the IRS. Withholding occurs at a standard rate (a percentage of your paycheck), the rate is the same for everyone. But not everyone has the same tax credits and deductions. A person with three children will get more likely get an IRS refund than a person with no children, all other things being equal.

When your employer withholds taxes from your paycheck, he or she has no idea what tax credits and deductions you will have come tax time. The credits and deductions will work to increase your refund. So it's up to you to file your tax return in order to get back that withholding, which, if you are due a refund, should theoretically never have been taken out in the first place if you simply consider the outcome. But that's how our tax system works.

So you see, getting your IRS tax refund isn't free money at all. It's just getting back some money you basically loaned the IRS for up to a year. It's like calling in a loan. So why would you blow that money on something you wouldn't normally buy?  

About Belinda Mills: Belinda Mills loves to write about taxes, fashion, and green living.  You can find more of her work at http://irs-refund.net

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