However, most Americans never adjust their W-4 Federal income tax forms or apply for Advanced Earned Income Credits because they like getting an income tax refund each year. That makes as much sense as overpaying phone bills every month just to get extra money back a year later without interest, says Dr. Fred Waddell, Extension family resource management specialist with the Alabama Cooperative Extension System. People also overpay their income taxes each month because they think they can't save money any other way. Income tax refunds are usually spent on things people think they can't live without.
Studies show income tax refund money is most often spent to buy cars and appliances.
Waddell says a simple adjustment in your income tax withholding is an inexpensive way to have what you want, including a financially secure retirement and emergency fund. Paying off credit card balances earns the equivalent of 27 percent interest on your money.