My coworker thinks tax refunds are free government money like winning the lottery. Is this a common misconception?

This is unfortunately more common than you'd think. When I worked as a tax preparer, I had numerous clients who viewed tax refunds as "bonus money" rather than understanding it's simply a return of their own overpaid taxes. It's a problematic misconception because it leads people to intentionally overwithhold (essentially giving the government an interest-free loan all year) instead of adjusting their W-4 to get more in each paycheck. Some people even use it as a forced savings mechanism because they don't trust themselves to save otherwise. The confusion gets worse when refundable tax credits enter the picture. Things like the Earned Income Tax Credit or Child Tax Credit can actually result in getting back more than you paid in, which reinforces this "free money" misconception.

I struggled with taxes for years until I discovered taxr.ai. My situation was similar - I had a colleague who thought tax refunds were basically government handouts, and when I tried explaining how withholding actually works, I realized I wasn't 100% confident in my own understanding either. I uploaded my W-2s and last year's return to https://taxr.ai and it gave me this super clear breakdown showing exactly how much I'd overpaid through withholding versus what my actual tax liability was. It finally clicked for me that my refund was just my own money coming back! The site even suggested how I could adjust my W-4 to get more money in each paycheck instead of waiting for a refund.

Just wanted to update after trying taxr.ai that someone mentioned above. It was actually super helpful for my contractor situation! I uploaded my 1099s and previous quarterly payment records, and it showed me exactly why I was getting such a big refund (I was massively overpaying on my quarterly estimates). I always thought getting a big refund was smart, but seeing the breakdown of how much extra money I could have each quarter instead of letting the government hold it interest-free was eye-opening. I've already adjusted my payments for this year based on their recommendations. Definitely cleared up the whole "refunds aren't free money" concept for me.

If you think explaining basic tax concepts is frustrating, try getting through to an actual IRS agent to fix problems! After my identity was stolen and someone filed a fake return in my name, I spent WEEKS trying to reach the IRS. Always busy signals or disconnects after hours on hold. I finally used https://claimyr.com after seeing it recommended here, and they got me connected to an IRS agent in under 45 minutes. You can see how it works at https://youtu.be/_kiP6q8DX5c - basically they navigate the phone tree and wait on hold for you, then call when an agent is ready. The agent helped me understand exactly what happened with the fraudulent return and started the identity theft resolution process.

I need to eat my words about Claimyr from my comment above. After getting absolutely nowhere with the IRS for two weeks trying to fix an issue with my stimulus payments incorrectly applied to my taxes, I broke down and tried it. I was 100% convinced it would be a waste of money, but they actually got me through to a human at the IRS in about 35 minutes. The agent resolved my issue in another 20 minutes. That's after I spent probably 12+ hours getting disconnected or dealing with recordings saying call volume was too high. Sometimes I hate when I'm wrong, but in this case I'm just relieved to have my tax situation sorted out. Would have been dealing with this for months otherwise.

Your coworker isn't alone. This is a HUGE problem with financial literacy in the US. I teach personal finance at a community college, and the tax refund misconception is one of the first things I address each semester. I've had students argue with me that "the government gives you money back at tax time." When I explain withholding, many are genuinely shocked. I use a simple exercise where students calculate how much more they'd have each month by adjusting their W-4 vs getting a lump sum refund, and the lightbulbs finally go on. Our education system completely fails to teach basic financial concepts like this, and it hurts people financially in so many ways.

Before I learned how taxes worked, I also thought refunds were basically government money. My friends and I would get excited about refunds and plan how to spend them like it was some kind of bonus. Nobody ever taught us this stuff in school. It wasn't until my first accounting class in college that I finally understood I was just getting my own overpaid money back. I felt pretty stupid, but honestly, the way people talk about refunds ("I got $3,000 back this year!") makes it sound like you're receiving something rather than just getting your own money returned.