K-State Research and Extension News
April 21, 2011
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Tax Refund? or, Interest-Free Loan?

MANHATTAN, Kan. – A tax refund may seem like a windfall, but is, in reality, the return of an interest-free loan.

“Qualifying for a tax refund typically means that a wage earner has overpaid his or her required withholding taxes in each paycheck, and provided an interest-free loan to the government throughout the year,” said Carol Young, Kansas State University Research and Extension financial management specialist.

While some people look to a tax refund as forced savings, it’s best to match withholding to expected tax liability and invest potential refund dollars in an interest-bearing account with your name on it, said Young, who encourages saving refund dollars for short- or long-term goals or building an emergency fund that will be available to the taxpayer as needed through the year, rather than just during tax season.

Electronically or individually depositing all or part of an income tax refund into a savings, investment or retirement account also may be appropriate, said Young, who noted that the IRS also promotes investing in savings bonds during tax time.

More information on managing money successfully and growing your savings is available at K-State Research and Extension offices throughout the state, and online.




K-State Research and Extension is a short name for the Kansas State University Agricultural Experiment Station and Cooperative Extension Service, a program designed to generate and distribute useful knowledge for the well-being of Kansans. Supported by county, state, federal and private funds, the program has county Extension offices, experiment fields, area Extension offices and regional research centers statewide. Its headquarters is on the K-State campus, Manhattan.

Story by: Nancy Peterson
K-State Research & Extension News

Carol Young is at 785-532-5773