The average tax refund 2024 continues to be a tempting carrot dangled by the IRS, but financial experts are sounding the alarm, urging taxpayers to reconsider their approach to this annual windfall.
Average Tax Refund 2024: Why It’s Time to Rethink Your IRS Windfall (Photo from: Yahoo Finance)
The Pitfalls of Big Refunds
As the statistics reveal, the allure of a sizable tax refund remains strong, with more than three out of five taxpayers eagerly awaiting their IRS check in 2024. Yet, beneath the surface lies a harsh reality: experts caution that these hefty refunds may not be the financial boon they seem to be.
The average tax refund for 2024 is approximately $3,200, which may seem appealing. Financial experts including Tax Policy Center‘s Janet Holtzblatt advise against premature celebration. A hefty tax refund is like handing the government an interest-free loan all year for many Americans. CPA Michelle Su suggests using this surplus, especially with rising household debt and credit card interest rates.
In light of mounting financial obligations, withholding too much from paychecks can exacerbate the burden of consumer debts. Su advocates for a strategic approach to tax withholdings, urging taxpayers to consider redirecting these funds towards debt repayment or savings accounts for long-term financial stability.
READ ALSO: Tax Season 2024: IRS Issues $3.6 Billion In Refunds In First Week Of Filing
Managing Your Tax Withholdings
Amidst the debate over tax refunds, understanding how to manage withholdings emerges as a crucial step towards financial empowerment. Taxpayers are reminded that they hold the reins when it comes to adjusting withholdings throughout the year. By submitting a revised W-4 form to their employers, individuals can take proactive measures to align their withholdings with their actual tax liabilities.
However, caution is advised when modifying withholdings, particularly during significant life events like marriage or divorce. Failure to account for these changes could result in underpayment penalties from the IRS, further complicating one’s financial landscape.
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