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Suze Orman: Something's ‘radically wrong’ if you’re getting a tax refund

Max Zahn with Andy Serwer
·4 min read

The Senate is on track to pass a new stimulus package as soon as this weekend, and as much as Americans may need cash now, personal finance guru Suze Orman says they should do everything to avoid a different government payment — tax refunds.

In a new interview, taped on Wednesday, Orman said the apparent government windfall indicates "something's radically wrong," since filers could otherwise have invested the money over the period it stood in the government's possession. She urged tax filers to adjust withholdings so they can retain such funds and place them in a retirement account or other investment vehicle.

"If you're getting a tax refund, something's radically wrong," Orman says. "Because even though interest rates are so low, you're still allowing the government to have an interest-free loan on your money for a year."

"If you really look forward to that refund, every single year is like, 'Oh my God, I have all this money.' Now, that also says to me that you needed that money during the year," she added.

"You could have taken [it] and put [it] into your Roth IRA, if you qualify for it income-wise," she says. "And dollar-cost averaging into the markets, whether it was via slices or an index fund or whatever, would have returned far better than for your money to just sit there with the government."

As of late last month, the IRS had processed 39.4 million tax returns and issued 28.3 million refunds this tax season, paying out tax refunds to nearly three out of every four filers, Forbes reported. The average tax refund had amounted to $3,021, the report found.

In addition to the missed investment opportunities while an eventual tax refund remains in government possession, a tax filer risks government delays in sending the refund. A report released by the Government Accountability Office this week found that that the IRS paid $3.03 billion on interest in delayed tax refunds for fiscal 2020 — a nearly 50% increase over such payments in fiscal 2019.

When to 'file your taxes right away'

Unlike her advice to skip out on a tax refund, Orman said tax filers should take steps to ensure they qualify for the income eligibility requirements that will grant them a stimulus check.

The $1.9 trillion COVID-19 stimulus bill would reportedly include an $80,000 salary cutoff for individuals, beyond which they will not receive a payment, according to an agreement reached this week between Biden and moderate Senate Democrats. The bill is pending a vote in the Senate.

The version of the bill that passed the House included a $100,000 salary maximum for individuals seeking checks, so the two legislative bodies will likely negotiate a compromise for the final law.

Because taxpayers can choose whether to base their eligibility on 2019 or 2020 tax returns, Orman said, they should quickly file this tax season if their salary dropped over the past year.

"If you made less this year than last year, then file your taxes right away, because you would qualify them possibly for the stimulus," she says.

"Just make sure that the government has your information via your tax returns and everything, because you're going to be the first people that [get it] sent," she adds.

Orman spoke to Yahoo Finance Editor-in-Chief Andy Serwer in an episode of “Influencers with Andy Serwer,” a weekly interview series with leaders in business, politics, and entertainment.

She started her career at Merrill Lynch in the 1980s and before long, she formed her own consulting firm. Then, in 2002, she launched "The Suze Orman Show" on CNBC, which made her the go-to financial guide for millions. She has written dozens of books, and now hosts "Suze Orman's Women & Money Podcast."

Suze Orman, personal finance guru and host of
Suze Orman, personal finance guru and host of "Suze Orman's Women & Money podcast," speaks with Yahoo Finance Editor-in-Chief Andy Serwer on "Influencers with Andy Serwer."

Speaking with Yahoo Finance, Orman said that tax season amid COVID-19 remains similar to what the process entailed before the pandemic.

But fear of contracting the virus in crowded indoor spaces or on public transportation may prevent Americans from filing their taxes on time. Orman urged people to make sure they find a way to file.

"Taxes — they're taxes," she says. "They're always going to be taxes."

"Just pay them people — just pay them," she adds.

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