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Spokane, Washington  Est. May 19, 1883
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Michelle Singletary:

By Michelle Singletary Washington Post

The average Internal Revenue Service tax refund at this point in the 2022 season is $3,175, up nearly 10% compared to a year ago.

Many people see their four-figure tax refund – year after year – as a windfall. It’s their cushion for the financially unexpected.

Over the years, I’ve tried to persuade folks to change the way they think about a tax refund. It’s not a bonus.

Unless your tax situation changed during the year – maybe you had a baby or bought a home – you’re just letting Uncle Sam hold your money for a year interest-free.

Okay, maybe you don’t trust yourself to save, so you rely on the refund to do it for you. Among those expecting refunds, 32% plan to save most or all of the money, according to a survey by earlier this year.

Readers have told me that the promise of a refund pushes them to file early. Others argue that – in today’s pitifully low-interest environment – the amount of interest lost is pretty small, so they aren’t concerned about letting the government play their banker.

As of April 8, the IRS said it has issued more than 70 million refunds worth over $222 billion. I wonder how many millions of individuals or couples receiving a refund could put that money to better use during the year?

Only 44% of Americans could cover an unplanned $1,000 expense from savings, according to another survey by In a pinch, without a rainy-day fund, 35% would have to borrow the money they needed by using a credit card, taking out a personal loan or hitting up family or friends.

If you’ve been using your tax refund as a forced savings technique, you should seriously reconsider this strategy as consumer prices rise because of inflation.

Rising prices could be here for some time as the U.S. economy continues to deal with the financial fallout from the coronavirus and the war in Ukraine. You are going to need more money in your paycheck to deal with the price increases in food, gas and utilities.

Inflation is at its highest level in 40 years. In March, prices rose 8.5% compared with a year ago, according to the Bureau of Labor Statistics. The cost of gasoline rose 18.3% last month.

If you’re looking to replace your car this year, it’ll cost you a lot more to buy a used or new vehicle.

The average new vehicle loan increased to $39,721 at the end of 2021, up 12% from a year earlier, according to Experian. Used vehicle loans jumped 20% to $27,291, up from $22,630. The average monthly payment for new vehicles was $644, while the average monthly payment for a used car was $488.

If you let the federal government hold your money, you could end up borrowing more for your vehicle. Instead, get more of your money in your paycheck and save for a higher down payment. Or, use the money to handle your loan payment.

Got a home equity line of credit? Looking to buy a home this year?

You could be facing higher costs for that debt.

The Federal Reserve raised its target federal funds rate by a quarter percentage point and has signaled six more hikes by year’s end in an effort to control inflation. The rate increases impact fixed-rate mortgages and anyone with a variable-rate loan.

As of April 14, the 30-year fixed-rate mortgage hit an average of 5% for the first time in over a decade, according to Freddie Mac. The 15-year fixed-rate mortgage averaged 4.17%. A year ago at this time, the average rate for a 15-year fixed-rate mortgage averaged 2.35%.

Got revolving credit card debt?

The rates on this debt are also trending up. found that 23% of people expecting a refund said they planned to use it to pay down debt. Rather than wait for a lump sum refund to pay down this debt, avoid racking up interest charges by paying on it during the year.

It’s not always possible to avoid getting a large refund. For some people, part or all of their tax benefits must be in the form of a refund, points out IRS spokesman Eric Smith. They have no choice when it’s the refundable portion of a benefit, such as the earned income tax credit or the child and dependent care credit, he said.

As a wage earner, you are required to pay federal income tax by having it withheld from your paycheck throughout the year. The goal is to have your withholding match your actual tax liability.

“In a perfect world, everyone would nail it, with maybe just a small balance due or a small refund,” Smith said.

You should evaluate your withholdings every year. You also want to make sure you don’t have a hefty, unexpected tax bill, especially if you can’t pay on time. The interest rate the IRS has to charge taxpayers when they can’t pay what they owe has increased. As of April 1, the rate for underpayment was 4%. The interest rate last spring, when people were filing their 2020 returns, was 3%.

To check your withholding and make adjustments, if necessary, use the IRS “Tax Withholding Estimator” at The estimator helps workers, self-employed individuals and retirees who have wage income figure out how much should be withheld from their paychecks. Use the result to submit a new W-4 Employee’s Withholding Certificate if needed.

With inflation up, now’s the time to go over your withholding for 2022. If you always aim to get a large refund, this is the year to change that habit.

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