The very same week our accountant (my father) informed us we would be getting a $1,550 tax refund (thank you, 2016, for the purchase of our first home and birth of our second child), my husband and I discovered a sizeable leak in our garage roof. So now, instead of using that money for a home repair we actually wanted to make, or to boost our savings account, or add to college savings plans, or more likely, to help pay for two kids in diapers and daycare, we’re buying a new flat roof. Lucky us. But this episode got me thinking—what do most people do with tax refunds? And what do CPAs advise they do? Is there a happy medium between fiscal responsibility and fun?
Aim for No Refund at All
First and foremost, the goal, according to most CPAs, is to not get a refund. While many people love getting a large chunk of change every spring, it indicates you’re overpaying and essentially giving the government a tax-free loan. Getting no refund at all means you’re paying the IRS exactly the right amount. Of course situations change from year to year (see my home purchase and birth of kid references above) so you might not always get it right.