It goes without saying that the U.S. tax system is terrible.
That said, owing some money at filing time is more efficient for you. If you are owed a refund, it means that you are getting paid back an interest-free loan that you offered to the government for the year. Offering that loan to Uncle Sam gives you zero benefit. If you want to save the money for a big purchase, it’s better off sitting in a interest-earning savings account, at the very least.
On the other hand, if you owe money at filing time, it means the government offered you an interest-free loan. You were able to take advantage of it throughout the year, and ideally put that money to good use. Now you have to pay it back, but at least you don’t have to pay interest on it.
The later scenario is part of why underpayment penalties exist.
Of course the whole system is pretty terrible especially as knowing the number at filing time requires reading a damn horoscope or something. But with a bit of savvy and planning, you can end up with a better outcome.
It goes without saying that the U.S. tax system is terrible.
That said, owing some money at filing time is more efficient for you. If you are owed a refund, it means that you are getting paid back an interest-free loan that you offered to the government for the year. Offering that loan to Uncle Sam gives you zero benefit. If you want to save the money for a big purchase, it’s better off sitting in a interest-earning savings account, at the very least.
On the other hand, if you owe money at filing time, it means the government offered you an interest-free loan. You were able to take advantage of it throughout the year, and ideally put that money to good use. Now you have to pay it back, but at least you don’t have to pay interest on it.
The later scenario is part of why underpayment penalties exist.
Of course the whole system is pretty terrible especially as knowing the number at filing time requires reading a damn horoscope or something. But with a bit of savvy and planning, you can end up with a better outcome.