Getting a tax refund once a year is not the best way to maximize your money, according to one tax expert.
“This is my lot in life is to remind people that depending on your tax refund is not a personal financial strategy,” said Mattie Duppler, a senior fellow at the National Taxpayers Union. “This is literally just money you are giving interest free to the government for an entire year when you certainly could be doing more with that money for your financial future.”
Instead, Americans could get that tax refund throughout the year in their paychecks by withholding less. The Internal Revenue Service offers a helpful estimator online so that you can adjust your paycheck withholdings accurately so you don’t owe the government and the government doesn’t owe you.
Read more: How to file taxes: The full breakdown
That could translate to an extra $100 or $200 more each month in paychecks of the average American, Duppler said.
“So think about what you could do with that money instead of letting the government hang on to it for you,” said Duppler, who recommended that taxpayers first use that extra cash to pay down expensive debt, then build an emergency fund, and invest in your future.
“All of those are better things to do than to be waiting until April 15 to get a tax refund back,” she said, “because then that money can work for you and could have been over the course of the previous year.”
Duppler stressed that just because you don’t get a tax refund doesn’t mean you’re paying more in taxes.
“The fact that most Americans have more money throughout the course of the year, of course it’s going to mean that they get fewer dollars back from the IRS at the end of that tax year,” she said. “It doesn’t mean you have higher taxes.”
Duppler also stressed the importance of updating your W-4 withholding form, especially if you had a major life event. While it’s too late to adjust your withholdings for this year’s tax season, there’s always next year to think about.