Suze Orman shares the biggest mistake people can make on their tax return

Key Points from 24/7 Wall St.

• Financial guru Suze Orman says getting a tax refund is a huge mistake.
• You’re giving the government an interest-free loan and getting nothing in return.
• Adjust your withholding to increase your paychecks if you’ve been getting a large refund year after year.
• The best high-yield savings accounts are paying way more than most Americans realize, with some offering cash bonuses for new accounts. Click here to see our top pick today. ^(Sponsored)

At this stage of the year, a lot of us aren’t ready to start thinking about taxes. But at some point between now and mid-April, you’re going to have to sit down with your accountant or bust out some tax software and file your return. And you’re probably hoping for a refund at the end of the day.

That’s understandable. Most people would rather get money back from the IRS in April than have to write the IRS a check. But if you ask financial guru Suze Orman, she’ll tell you that if you’re getting a tax refund, you’re making one of the biggest mistakes out there.

Why tax refunds aren’t actually a good thing

A lot of people are wired to think that tax refunds are something to celebrate. But one thing you have to realize about a tax refund is that it’s not free money. Rather, it’s simply the government’s way of returning the money it took from you that it wasn’t entitled to.

When you end up getting a tax refund, it means you’ve given the government an interest-free loan with nothing in return. Does that still sound like a good thing to you?

Here’s another way to think about it. Let’s say you typically get a $2,400 refund from the IRS each April. That means your monthly paychecks could’ve been $200 higher throughout the year.

Now, think about what an extra $200 a month could do for you. Maybe it could spell the difference between being able to pay off your credit cards in full versus racking up interest on the balances you’re forced to carry forward. Or maybe it could mean getting to fund your workplace 401(k), snagging your employer match for extra free cash, and being able to invest money for your future.

These are all good things for your finances. Lending the government money without any incentive is not.

Make changes if you’re someone who tends to get a large refund

It’s hard to pay your taxes perfectly during the year so you owe absolutely nothing when you file your return and get absolutely nothing back. If you typically get a $100 to $200 refund, that’s not a particularly big deal, and there’s generally no need to make any changes. But if you’re getting a $2,000 refund or more, that’s a different story.

In that case, you may want to adjust your withholding so that less tax is taken out of your paychecks every month. And if you’re worried that getting more money each month will cause you to owe the IRS money when you do your tax return, here’s a solution.

Once you change your withholding and your paychecks increase, take the extra amount you get each month and put it into a dedicated high-yield savings account. You can tap that account for emergencies, but otherwise, aim to leave it alone until you’ve filed your tax return.

If, when you go to do that, you see that you owe the IRS money, you can simply dip in and pay off your balance. But that way, you’ll have earned interest on your money, as opposed to giving the government an interest-free loan.