Forced Savings Weren’t as Useful This Year

by Chris McGinty of AccordingToWhim.com

It’s interesting to me how many people are upset that their tax returns aren’t as big as they have generally been. I’m not really here to point out the obvious, which is the reason you generally get tax returns is that you paid too much of your own money in withholdings. You’re getting back the money that was actually yours to begin with. That is an important point, but the more important point is that withholdings is not a savings account.

There is an odd phrase that floats around financial circles, which is “forced savings.” The idea is that because the government held out too much from your paycheck that you ended up with a nice bit of savings that you can use for a bigger purchase that you wouldn’t have been able to afford normally. Think about that for a second, because people actually say this like it’s a good thing.

The money is there either way, but if I get it throughout the year I’ll spend it and won’t get to make the big purchase.

And that’s why people are mad. They were expecting to make bigger purchases, but then it turned out that their withholdings were closer to correct than normal, which means that their only form of savings isn’t there.

There are so many directions that I could go with that, but I think I’m just going to leave it as an open ended thought for now.

Chris McGinty is a blogger who owes the IRS this year, because he wasn’t technically an employee of Uber, even though every other aspect of the job works that way.