Tax season is upon us again. Hooray! This is the time when we reap the fruit of all our year-round tax planning (you make tax-smart decisions all year long, right?). We get to prepare our tax returns and pay as little as possible to Uncle Sam.

For lots of tips on how you can do just that, pop in to our Tax Center, which is chock full of valuable information and suggestions. (And visit our IRA Center, too, for guidance on maximizing your retirement plans.)

Permit me to offer just one little tip here, though: Don't give Uncle Sam big, interest-free loans. I have been guilty of doing so in the past myself. Let me back up first and explain what I'm talking about.

Remember your friend the W-4 form? It's the one you usually fill out whenever you start a job. You enter your number of dependents, among other things, and the results help your employer know how much money to withhold from your wages for taxes. (Note that whenever your status changes, so should your W-4. If you just had twins, ask your employer for a new form to fill out.)

If you have too much money withheld during the year, it's not lost. You get the excess back -- in the form of a refund check -- after you file your return. This is what I used to do too often. I liked getting a big check once a year. It always felt like a windfall. But that was wrong-headed thinking. The right way to look at it is this: That's your money, not a gift from the government. It's money that could have been working for you all year long, in an investment or in a new roof for your home or in many other ways. Why should you let Uncle Sam accumulate extra money from you? By doing so, you're effectively giving him a loan, which he can invest and make money off of, instead of you doing so.

Take action, Fool. If you've been getting hefty refunds, revisit your W-4. You can file a new one with your employer anytime. Note also that outsize refunds sometimes draw the attention of IRA auditors -- consider that another reason to stop loaning Uncle Sam the big bucks.

Here's another way to look at it. After I wrote recently about refund rip-offs that have been engaged in by the likes of H&R Block (NYSE:HRB) and Jackson Hewitt (NYSE:JTX), Fool reader Tom Knobel emailed me, suggesting I go into that line of business. Here's his insightful marketing pitch:

Dear Friend:

If you are a taxpayer who receives a $1000 (or more) refund from the IRS every year, have I got an offer for you! ACT NOW -- enroll in the "Selena's Tax EArnings, LLC" Program (STEAL) and save yourself the hassle of making interest on your own money. Hurry Hurry Hurry!

It's simple. Instead of keeping as much of your take home pay as possible, loan it to me and I'll pay you 0.00% interest on your money! That's right, STEAL will give you YOUR MONEY back on April 15th, just like the IRS does!

Sure, you could take the dollar amount of your last IRS refund, divide it by the number of paychecks you typically receive in a year, and adjust your withholdings accordingly. But that's so. much. work. I mean, you would have to fill out one of those withholding forms that your personnel department keeps on file, and that could take upwards of 5 or 10 minutes!

And what would that get ya? $50, $75, $150 a payday? You don't need the hassle! After all, what are you going to do with that money? Pay off high interest credit cards? Stick it in (a short-term savings) account and make 2.5% on your money? Invest it in an index fund; maybe make 10% on your money? Maybe invest in a few Hidden Gems newsletter stocks and make 40+% on your money over the course of the year? Noooo, don't risk it. Better to just give it to me. Let ME hold it for you.

After all, that's what you're doing now with the IRS every year, isn't it?


Selena M.


Well said, Tom!

Longtime Fool contributor Selena Maranjian does not own shares of any companies mentioned in this article.