Tax Refunds--Whatcha gonna do with it?

[Jazzmint98]

I probably won't be getting a refund. If I do, I plan to pay off some of my student loan and put the rest in my Roth IRA.

[Slandgie]

I would be curious to what the American public would answer to this. From the folks on here, the vast majority are saving it or paying off debt. I am sure that is not what the majority of Americans would answer!

[kri$ten]

Savings... gotta work on that EF.

[Joan.of.the.Arch]

I would be curious to what the American public would answer to this. From the folks on here, the vast majority are saving it or paying off debt. I am sure that is not what the majority of Americans would answer!

I don't know, many people are being more careful with their money. Many are still unemployed; many are losing their businesses; many are underemployed; many are in fear of having wages or salaries cut back, if not their jobs lost entirely. These are sobering factors. I suspect the majority of USAers who get a refund will apply it to debt, apply it to current needs, or add it to their savings.

[disneysteve]

I suspect the majority of USAers who get a refund will apply it to debt, apply it to current needs, or add it to their savings.

I think you are seriously mistaken. Just because most of the folks here on this forum are responsible with their money, the vast majority of Americans are not. I agree that some people seem to be starting to get the message but look around and you'll see they surely don't represent the majority.

The unemployment rate is only 10%. Yes, I said only. That means 90% are employed. Retail sales over the holidays held up pretty well. Airports are packed with travelers. Restaurants are packed with diners. Malls are packed with shoppers. People might be hunting for bargains a bit more, watching the sales a little more carefully and clipping a few more coupons, but they certainly haven't stopped spending on luxuries. Look at the excitement brewing over the new iPad from Apple, a device that exactly zero human beings actually need. That won't prevent Apple from selling millions of them.

Call me cynical but I think most people will do the exact same thing they always do with their refund - look at it as free money and spend it on whatever they've had their eye on for the past few months. That might be a new cell phone or digital camera or laptop computer or vacation or mag wheels or leather jacket. I've already heard a few people I know talking about their plans for their refund money and none of it involved paying off debt or adding it to savings.

[Slandgie]

I agree with Steve...first of all, the refund is not free money...it's money you have earned through out the year! People think it's a gift from the government...far from it! It was my money to begin with! Other people in my line of work (who pretty much make what I make) always get refunds in the $2K to $5K range...you woulda thought they hit the lottery.

If I get $1K back from the feds, that is on the high end. Usually about $200 to $300 goes to the state, so we have a little bit left over....

[KTP]

I should hide my head in shame because we get back about $5k a year

I think this stems from years ago when we were first married and miscalculated taxes and owed $2000 plus penalties. Back then it was a huge amount that almost cost us being late on our mortgage a few times.

I really should adjust it back to where we get $500 back or so, but I am always sure this is the year they are gong to jack us by not adjusting the AMT hit like they have to do every year.

[disneysteve]

I should hide my head in shame because we get back about $5k a year

That's happened to us a few times. We always find it very challenging to accurately estimate our withholding because we can't predict all of our income. For example, one year a couple of our investments paid huge capital gains which were taxable. Another year, the gains were much, much smaller so we owed a lot less in taxes. My wife's employment status has fluctuated over the past few years - full-time at one job, then part-time, then none, then part-time at a different job, then contributing 50% of income to a 401k leaving a lot less taxable income. Plus, I get a varying degree of self-employment income from medical surveys, advisory boards, ebay sales, etc. Some years that may be close to 10K, other years a lot less. If I base my withholding off of last year's numbers and this year works out significantly higher or lower, it throws off the calculations and sometimes that results in a bigger than desired refund.

[cptacek]

Without searching, I'm guessing it it farm related. Right? wrong?

Right. It is what cuts the hay and puts it into windrows so the baler can roll it up into bales. It is my "second job" during the summer.

[Radiance]

I think most people will do the exact same thing they always do with their refund -

Sadly, I think Steve is right, I hear my coworkers hoping for a huge refund and the plans are typically buying stuff they wouldn't be able to afford otherwise. They look at me funny when I say I am assigning the whole thing to paying off debt.

I have to admit until I read this thread I thought a big refund was a good thing.

Now, I maintain for some IT IS indeed a good thing. I have a couple of friends that say that is the only way they get some money on their savings account. It is a forced savings. When they get their refund, they send half to savings, half to spending.

[disneysteve]

I hear my coworkers hoping for a huge refund and the plans are typically buying stuff they wouldn't be able to afford otherwise..

Yep. Same here. This time of year, I hear many of my patients talking about how they plan to spend their refunds. These same folks also invariably get rapid refund loans when they have their taxes done at one of the pop-up tax places that opens every January. So not only are they blowing their refunds, they are paying 150% or higher interest to get that loan 2 weeks sooner.

[GREENBACK]

Yep. Same here. This time of year, I hear many of my patients talking about how they plan to spend their refunds. These same folks also invariably get rapid refund loans when they have their taxes done at one of the pop-up tax places that opens every January. So not only are they blowing their refunds, they are paying 150% or higher interest to get that loan 2 weeks sooner.

I think many folks honestly don't understand that they aren't being given money. They truly don't realize that it's their money they are getting back. I've heard this in a number of places. I've heard of many people getting thousands back from the gov't. They then proceed to blow the money as if it's some wonderful windfall.

This isn't just from poor, uneducated people. I've also seen the quick loans....duh! you could have got that money up front thru the year.

Makes me scratch my head.

[disneysteve]

I really don't understand the refund loans. If you e-file, it only takes 10-14 days to get your refund. Is it really worth paying upwards of 150% interest to get the money faster?

[Beppington]

I have to admit until I read this thread I thought a big refund was a good thing.

Back in the 90's when I first read the advice about trying to make sure you get as small a refund as possible, I thought, "God, are they trying to take the fun out of everything??"

Now that I understand why, along with getting the rest of my financial life in order, I am more happy to get no refund knowing that I'm about as stream-lined & efficient as I can be.

[Beppington]

I really don't understand the refund loans. If you e-file, it only takes 10-14 days to get your refund. Is it really worth paying upwards of 150% interest to get the money faster?

Some people really do live day-to-day. Several of my friends are exactly that way. I get comments like, "What if I die tomorrow?" Like their dead body is gonna look back and say, "Man, what the heck was I saving for?? I shoulda lived it up!"