Only You Can Prevent Tax Refund Windfall Syndrome

As the April tax deadline approached, I picked up on a re-birth of a certain sentiment that goes a little something like this “I can’t wait to get that refund so I can spend it on ___________”. Maybe it’s a true sign of economic strength – unabashed consumer wastefulness – rearing its ugly head again. I’ll assign it a medical diagnosis term: Tax Refund Windfall Syndrome, or TRWS for short (I’m coining that).




Over the last month or so, I must have heard at least a dozen or so people make some sort of proclamation or “bragadation” about how they are going to spend the huge tax refund they are about to get, as if it were some sort of unexpected windfall received from a wealthy step-Uncle they never knew or money they’ve swindled from Uncle Sam. Note: the average tax refund last year was $3,145 (higher than the actual amount of saved income for the same year).

tax refund

I’ve personally heard of wastefully ambitious goals such as absurd kitchen remodels, leasing a fancy new SUV, a cruise, and more.

Now, I could play Debbie Downer and call these people out to their face for not being clever in wasting money that was already theirs to begin with. But, I still try to maintain some sort of semblance of what some may deem as a “social life” with others.

So, I sit there and smile and nod my head. Deep inside, particularly because I’m a personal finance writer, the life force is being sucked from my soul as I stand witness to a manifestation of a misinformed cliche.

So let’s end it right now – a tax refund is not a bonus, a freebie, a gift, or a windfall.




Typically, about 65%+ of Americans expect to receive a tax refund. Most are anxiously awaiting that refund, as if it were a bonus or a gift. But, all getting a refund means is that the recipient was on the wrong side of the tax payment see-saw. On the other side is Uncle Sam, and he’s laughing, because he just borrowed money (in the form of tax over-payments) interest-free over the course of the previous year. A tax refund is no gift. No windfall. No reward. And it definitely does not warrant bragging rights. It’s simply you getting money that you loaned the government back, interest-free.

That tax refund money could have been better used over the year to avoid or pay off high-interest debt, to earn a 401K match, or at least earn a few percentage points return in a bank CD. Instead, the government used it, $335 billion of it last year, and the recipient actually lost money through missed opportunity costs.

Giving this message here and now, to the masses of readers here, who I am hoping share with their social network in order to earn back their own life force (use me as bad-cop) – is my way of keeping my soul alive.

If you happen to be one of those who have treated your refund as Monopoly play-time money, I don’t mean to insult or make you feel dumb. But I absolutely want to squash whatever misinformed tax windfall meme you’ve been fed by the media or wasteful peers.




And, I want to offer a chance at redemption through the following 4 steps:

  1. Acknowledge that your tax refund is your hard-earned money and should be treated as such.
  2. Congratulate yourself for surviving the year with additional funds that you did not budget in. You’re a true survivor! Now take those extra funds and pay off some debt, save for retirement, and maybe even treat yourself to a few quality brews as a reward for good behavior. Here are the best ways to use your tax refund to get the highest ROI.
  3. Change your withholding tax amount on your W-4, with the goal of breaking even or owning a tiny amount on next year’s tax return.
  4. Smile and nod when others proclaim their intended wastefulness, but don’t congratulate them. And don’t give in to the urge to re-join that bandwagon.

Only you can prevent Tax Refund Windfall Syndrome.

Tax Refund Windfall Syndrome Discussion:

  • Have you ever had a case of Tax Refund Windfall Syndrome? When did you realize it, and how did you cure it?
  • What’s the worst case of TRWS you’ve encountered? What did you do or say?

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13 Comments

  1. Jake Erickson
    • AP
  2. Honey
  3. Emily @ evolvingPF
  4. Drake
  5. Pickle
  6. Dustin
  7. William @ Bite the Bullet
  8. alicia
  9. alicia
  10. slinky
  11. Ronald

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