The average tax refund last year was $3,003.
Filing data complied by the Internal Revenue Service through April 8 show that refunds issued so far in 2011 are close to that amount. For returns processed by early April, the average refund was $2,895. Taxpayers who had refunds directly deposited to a bank account got a bit more, $3,100 on average.
Large tax refunds have been the trend for more than a decade. A report by The Wall Street Journal found that in 1999 the average tax refund was $1,698, and that the growth in refunds has been across all income levels.
The penchant to use the IRS as a savings account goes against traditional tax advice. Most tax experts, including me here on Bankrate, recommend you adjust your withholding so that you, not Uncle Sam, have use of your money throughout the year.
Obviously, since most people get refunds each tax year, most people are ignoring us.
The next logical question is: Why are folks disregarding our sound tax advice?
One reason is that many people simply aren't good money managers. A lot of these fiscal types are my relatives. They get extra money, they spend it as quickly as they can. Using payroll tax overwithholding as a forced savings account is the only way they can be sure they'll have a sizable chunk of cash to buy a large item or take an expensive trip.
I get that. And given how minuscule savings interest rates have been for the last few years, I have no grounds to scold you for wasting extra earnings.
Still, most people who are getting these annual big refund checks are adults. They should be able to manage their money, and yes, I am talking about -- and to if they're reading -- my aforementioned relatives.
So act like a grown-up when it comes to your money and your taxes. Change your withholding amount so that your money comes back to you each paycheck.
If you don't trust yourself not to spend it, set up direct deposit of the extra pay into a savings account. That way you won't get your hands on the money immediately, but neither will you have to wait until tax filing season to have access to your cash.
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