Are you planning on a tax refund this year? I’m not a fan of planning for tax refunds. At best, you’ve just given the government an interest-free loan. No one gives you an interest free loan, why would you make loans for no interest? And while you’re at it, I’d love to get some of that interest-free money too.
That’s the best case – that you get your money and you don’t get paid any interest on it. But what if the tax refund is from a broke state? More and more states are considering issuing script like California did. The script was a promise to pay at a future date when the state has money. Try spending that at the grocery store!
And there is one more reason why you might want to think twice about planning for a tax refund. They are subject to tax liens.
Right now the IRS has a broken system in assessing liens. You may have a tax issue and while you’re waiting for them to respond, another department assesses a lien.
And that means they can (and will) grab your tax refund. Now you’re dealing with a third department in the IRS – the guys who undo bad tax liens.
This is one more reason to protect your tax money by not planning on having a tax refund. It’s not too late to change your tax deductions from your payroll check or reduce an estimated tax payment. Protect your money. You worked hard for it.