Suze Orman Calls a Tax Refund a 'Huge Opportunity' She Doesn't Want People to Miss Out On. But Should You Really Hope for a Refund?

A refund isn't all it's cracked up to be.

The April 18 tax-filing deadline is almost upon us, so at this point, a lot of people have finished their 2022 taxes and are waiting for their refunds to arrive. You might have a few thousand dollars that are about to hit your checking account, and that might seem like a good thing. 

In fact, financial guru Suze Orman tweeted that a tax refund is "a huge opportunity that I don’t want you to miss out on." What she means by this is that if you're getting a nice refund, you should put it to good use, whether by using it to boost your emergency fund, contribute to your IRA account, or tackle a much-needed home repair you've long been putting off.

But while you might be happy about the fact that you're getting a tax refund, in reality, you actually shouldn't be. Here's why.

It's not free money

A lot of people get a tax refund and think, "Sweet, here comes some free cash for me." But one thing you must understand is that a tax refund is not free money, or a gift from the IRS. If you're getting a refund, it's because you paid too much tax the previous year, thereby denying yourself access to money you could've had sooner. And that's really not a good thing at all.

Last year, many people struggled to cover their bills as inflation drove the cost of living higher across the board. If you're getting a refund of $1,200 this year, it means you could've had access to an extra $100 every month in 2022 -- only you didn't. That probably made things stressful.

Another thing you should know is that when you're due a refund, the IRS is not obligated to pay you interest for hanging onto your money. So when you get a refund, it's basically like giving the government an interest-free loan.

Now, think about what your savings account was paying last year. Would you not have preferred to stick that money in your own bank account and enjoy interest on it yourself?

You can still change your withholding for 2023

At this point, you may no longer be as excited about the prospect of a tax refund. And so if you'd rather collect more of your money upfront this year, make some changes to your W-4, which is the form you fill out at work that determines how much tax you have withheld from your paychecks. 

The good news is that you're allowed to make changes to your W-4 whenever you want. Granted, your payroll department may not appreciate it if you decide to change your withholding every month. The point, however, is that a one-time adjustment is certainly acceptable, and it might result in larger paychecks. That could mean you'll need to brace for a smaller tax refund in 2024, but at least you'll get access to more of your money as you work to earn it. 

If you're worried about owing the IRS money next year due to changing your withholding, you can always stick the extra cash you get in your paychecks into your savings and earmark it for a tax bill, just in case. But that way, at least you'll be earning interest on that money instead of the government.