I’m Going to Owe the IRS Money This Year. Here’s Why I’m Happy About That

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Tax refunds really aren’t a good thing, although they may seem like it. 

During the 2022 tax-filing season, the average tax refund was $3,039, according to the IRS. The agency delivered a total of 96 million refunds collectively valued at more than $292 billion.

Many people await the direct deposit of this money into their bank accounts. I am not one of them. I have not received a tax refund for the vast majority of my working life and I will not receive a refund when I file my taxes in 2023 either. In fact, I will owe the IRS a little bit of money.

While having to pay a tax bill may not seem like the most fun thing to do with your hard-earned dollars, I am actually very happy to have an outstanding balance due. Here’s why.

Owing the IRS money means I kept my own cash in hand

The reason I am happy that I will owe the IRS money is simple. I’m pleased I didn’t overpay my taxes and end up giving the government my money to hold onto interest free for months at a time.

See, while a tax refund may feel like a windfall, it’s not. It’s the government giving your own money back to you — sometimes months later than you paid it in. If you loaned a friend thousands of dollars in January and they gave it back to you the following April without paying a dime of interest, you probably wouldn’t be celebrating. But that’s essentially what happens if you pay too much in taxes and get excited about a refund.

I not only don’t want to give the IRS an interest-free loan, but I also don’t want to have my money tied up during the year in case I need it. If I keep money in my savings account, I can access that money if I have an unexpected expense or if I want to pay extra on a credit card bill to avoid interest charges. I have all year to save up for my tax bill, and in the meantime, I can use the cash for anything I prefer.

If I’ve overpaid the IRS, though, then I have to wait to get my refund if I want to get that cash back — and that may happen months after I actually need the money.

You don’t have to get a big refund if you don’t want one

For me, it’s easy to control how much I pay on my taxes because I pay quarterly estimated payments since I don’t have a traditional employer who withholds money for my tax bill.

But, whether you work for yourself or a company, you don’t have to get a refund. You can just adjust the amount you pay in when you work independently or can adjust your withholding with your employer by completing a new W-4.

You want to make sure you don’t pay in too little and get hit with an underpayment penalty, but as long as you’re meeting the minimum requirements, you absolutely do not need to pay any extra that the IRS will have to refund you later.

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