NEW YORK (MainStreet)I am talking about a tax "overpayment." Or perhaps I should title this article "The Big Refund."
By getting a big tax refund you are basically making an interest free loan to the government. If you want to loan money to the government, buy savings bonds. At tax time, you should ideally owe your Uncle Sam, and applicable state tax authority, enough so as not to be assessed an underpayment penalty - so the government is in effect making you an interest free loan.
But is a big refund really so bad? Or is it a legitimate form of "forced savings"?
Back in "the day", when a basic savings or checking account with the smallest balance earned 5.25% in interest, banks offered "Christmas Club" or "Vacation Club" accounts. You were given a coupon book, and each week you would make a payment to the bank of, say, $10. After 50 or 52 weeks, the bank would give you a check for $500 or $520 plus accrued interest, or perhaps the bank would make an extra payment for you and you would get a check for $510 or $530.
Nowadays my local banks pay 0.5% to 0.10% on a basic low balance statement savings account and 0% on a "Holiday Club" coupon book account. My Christmas Club - I put $10 a week in a jar in my kitchen.