"How's it look?" he asked.

"Well," I said, "You're getting a refund."

"Great! How much?"

"Oh, it's a big one," I said. "Over $5,000 dollars."

Mr. Taxpayer couldn't have been happier. He face lit up like a light bulb. He was ecstatic -- he sincerely believed that he had "beat tax man" by getting such a large refund.

I was not so happy. I couldn't understand his thinking. So I asked him if he really meant to get such a big refund. Mr. Taxpayer was a W-2 employee and so I wondered if his payroll department made a mistake -- were they doing his withholdings wrong? Did he really want to have so much tax taken out of his paycheck each week?

Mr. Taxpayer went on to tell me that he has a tremendous fear of having a balance due on his return. For some reason, he just assumed that if he ended up owing money to government at end of year, somehow he would get in trouble with IRS. So he went to opposite extreme.

In addition, he thought that getting a big refund was a great way to save money during year, so that at end of year he got a nice little "bonus" from government. You know, a forced savings plan.

I can think of at least 5 reasons why Mr. Taxpayer's thinking is flawed.

REASON #1: When you get a big refund, you are loaning your money to government.

My biggest objection to getting a large refund is simple fact that you have given IRS an interest-free loan of your hard-earned money.

Mr. Taxpayer's $5,000 could have been earning interest over course of year. So by letting government keep his money, he was actually losing money!

Sure, with rates so low, maybe we're not talking about a lot of interest income here, but why give government your money any sooner than necessary?

REASON #2: Getting a big refund does not mean you are paying less tax.

I know how complicated are tax system is. It's crazy, convoluted, chaotic and inconsistent. I deal with our tax laws every day, and there's stuff in there that will drive any sane person over edge.

But on this point, there really is a lot of misunderstanding on part of innocent (but misinformed) taxpayers:

Getting a large refund does not mean that you somehow paid less tax than if you got no refund.

As with most people your home and retirement savings probably represent bulk of your available assets. However, withdrawing money from your retirement accounts, even if it’s to protect against a foreclosure, will cause you to lose a big part of your retirement money to taxes. A better strategy is to take money out of your retirement funds by way of a 401k loan. A loan from a 401(k) doesn’t trigger any distribution taxes and avoids 10 percent early withdrawal penalty, as long as you repay loan.

When you have a job you generally can get a loan from your employer’s 401k plan. But once you leave or lose your job, as a rule, you can no longer keep your 401k loan or borrow from plan.