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Half of Americans Lose Money Every Year Due to This Tax Mistake

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Americans are split on their preferences for annual tax refunds. In a recent survey by, 48% say they would rather get a $3,000 tax refund, while 52% say they would rather get $115 more in each paycheck. 

The options presented in the survey come from IRS data that shows the average federal tax refund in America is approximately $3,000 [1]. The $115 figure is a result of dividing that $3,000 by 26—the number of biweekly paychecks an employee receives in a year.

The survey comes as Americans prepare for the 2019 tax season that goes from January 28 through April 15 [2]. While personal finances may seem a matter of preference, a big tax refund isn’t necessarily a good thing.

would you rather have a tax refund or a bigger paycheck?

5 Things Americans Could Do with a Bigger Paycheck Instead

While the survey shows that Americans are spilt on a refund versus getting more money each paycheck, by withholding too much from your paycheck, you essentially give the government an interest-free loan. If that’s not enough to make you reconsider your tax withholding, here are a few more things you could do with that money during the year.

five things to do with a tax refund

Pay Down Debt

Paying down debt is the most common way Americans use their tax refunds. 27% of Americans plan to use their tax refund to pay off debt in 2019 [3]. Ironically, they could be paying off debt sooner, and with less interest, by getting extra money in each paycheck throughout the year.

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    Consider that the average tax refund in 2017 was around $3,000 [1]. If you get that money throughout the year instead, you get an extra $230 every month that you can put directly toward your debt!

    Build an Emergency Savings Fund

    The second most popular way people plan to use their tax return is to build a savings account. While building a savings account is a great way to use your tax refund, getting that money as you earn it lets you make interest on the money all year long.

    The average interest rate on savings accounts is 0.09% APY [4], which may not seem like a lot, but it’s better than 0%, which is how much you’re getting when you leave your money with the government. High-interest rate savings accounts are another great way to take advantage of that extra income each month. Plus, when you consider that 2 in 5 Americans can’t cover a $1,000 emergency expense [5], having that money available in times of need is a huge help.

    Save for Retirement

    In addition to general savings, 7% of people said they plan to use their tax refund to save for retirement [3]. Similar reasoning to getting the money earlier for emergency savings applies here. If you bumped up your 401(k) contributions by even a percentage point or two over your working career, that small adjustment makes a difference in your retirement lifestyle—especially if your employer offers a 401(k) match!

    Start a Side Hustle

    For 3 in 5 Americans, a goal is to start their own companies or have side hustles [6]. Maybe you’re one of them and have a genius idea brewing, but you don’t have the money to get it off the ground. You could take your extra $230 a month and put it towards your business idea. Consider it an investment in yourself.

    Take a Family Vacation

    Taking a vacation is definitely on people’s minds come tax season with spring break and warmer weather creeping in, but wouldn’t it be nice to beat the seasonal blues with a mid-winter getaway? Setting aside your money in a separate vacation account every month can help you afford your dream vacation, even if that’s a staycation.

    How to Get More Money Throughout the Year

    If you’re concerned that you’re getting too much back in your tax refund, especially if that amount is a big percentage of your income, consider adjusting your withholding. The IRS has a withholding tool that lets you do a quick “paycheck checkup” as they call it. The tool helps identify the right amount of tax that should be withheld from your paycheck. Once you determine whether or not you need to make changes, you can file a new W-4 with your employer. If you’re someone who regularly ends up paying taxes, you can also benefit from changing your withholding.

    While it’s too late for 2019, maybe the idea of more money in your pocket will prompt you to reconsider your withholding for next year. Everyone likes the idea of a windfall, and most people are relieved to find out that they don’t owe money come tax season—a quarter of Americans actually fear getting audited. But don’t let taxes scare you. If you’re concerned about your finances, consult a professional or try some easy tips to get taxes over with this season.


    This survey cited here was conducted by in January 2019 using Google Surveys. The sample consisted of one question as follows, “Would rather get a $3,000 tax refund, while 52% say they would rather get $115 more in each paycheck?” The survey received no less than 1,000 completed responses. Post-stratification weighting has been applied to ensure an accurate and reliable representation of the total population.


    1 IRS 2017 Internal Revenue Service Data Book (Publication 55B)

    2 Business Insider The IRS is now accepting tax returns, and you can file as soon as you have all your forms

    3 GOBankingRates Here’s the No. 1 Thing Americans Do With Their Tax Refund

    4 FDIC Weekly National Rates and Rate Caps (as of the week of January 21, 2019)

    5 BankRate Most Americans don’t have enough savings to cover a $1K emergency

    6 VistaPrint Expectations vs. reality: what’s it really like to go it alone?

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