Where should my tax return go?

**disneysteve** · 01-26-2009, 05:49 PM

How much will the refund be?

Can you quickly summarize the debt for us - balances and interest rates?

Do you currently have any savings for emergencies?

**skylovessea** · 01-26-2009, 05:53 PM

Originally posted by disneysteve View Post

How much will the refund be?

Can you quickly summarize the debt for us - balances and interest rates?

Do you currently have any savings for emergencies?

The refund is 3500.

Our debt is all in collections, so the amounts aren't based on interest rates anymore. It's all just collecting dust in collections (no pun intended

) and increasing every couple of months. There is a link to my current debt situation here: http://www.savingadvice.com/forums/d...ollection.html

We are working on the Total Money Makeover plan for our emergency fund but we haven't started it yet; we were planning on definitely using some of it to start an EF account.

**disneysteve** · 01-26-2009, 06:02 PM

Credit cards only: $2089
Current tuition: 639
Unpaid taxes: 158
Payday loans: 400
Student loans: 9816

Assuming this list is still roughly accurate, I'd settle the unpaid taxes first. You don't want to mess with the government. Then I'd probably get rid of the 2 other small amounts - tuition and payday loans. That would use up $1,200. Put $1,000 in savings for emergencies. Put the other $1,300 toward the student loans.

The other thing to do is to adjust withholding so that you don't get such a huge refund for 2009. You need that money now, in each check, not next February. that's an extra $300/month that you could be taking home.

**skylovessea** · 01-26-2009, 06:19 PM

Originally posted by disneysteve View Post

Assuming this list is still roughly accurate, I'd settle the unpaid taxes first. You don't want to mess with the government. Then I'd probably get rid of the 2 other small amounts - tuition and payday loans. That would use up $1,200. Put $1,000 in savings for emergencies. Put the other $1,300 toward the student loans.

The other thing to do is to adjust withholding so that you don't get such a huge refund for 2009. You need that money now, in each check, not next February. that's an extra $300/month that you could be taking home.

The state taxes are definitely getting paid first (if they aren't taken out directly, which will probably happen). I've actually got a different plan for the debt. We are in the process of paying it off monthly based on a strict schedule that minnie1928 helped me with. We'd rather put most of the return in savings. We have some other things that need to be purchased with the return (household items, car repairs, etc.) that we have been unable to do as we haven't seen paychecks from my husband's new jobs.

I'm not to tax savvy so I don't really understand what you mean about that second part.

**minnie1928** · 01-26-2009, 06:29 PM

Originally posted by skylovessea View Post

The state taxes are definitely getting paid first (if they aren't taken out directly, which will probably happen). I've actually got a different plan for the debt. We are in the process of paying it off monthly based on a strict schedule that minnie1928 helped me with. We'd rather put most of the return in savings. We have some other things that need to be purchased with the return (household items, car repairs, etc.) that we have been unable to do as we haven't seen paychecks from my husband's new jobs.

I'm not to tax savvy so I don't really understand what you mean about that second part.

What Steve is referring to is your husband's withholding rate on his paychecks. When your husband got his 2 new jobs (congrats by the way!!

) he was asked to fill out a W-4 form for his employer (it looks like this http://www.irs.gov/pub/irs-pdf/fw4.pdf?portlet=3). That determines how much tax is taken off his check. My guess is that he probably filled it out with 2 or 3 dependents. Try to use the IRS's calculator (IRS Withholding Calculator) to determine a different dependent number to knock down the amount of tax deducted per pay.

Everything else sounds like you are continuing to move in the right direction, great job!!

BTW - did you find a bank for your direct deposit?

**skylovessea** · 01-26-2009, 06:52 PM

Originally posted by minnie1928 View Post

What Steve is referring to is your husband's withholding rate on his paychecks. When your husband got his 2 new jobs (congrats by the way!!

) he was asked to fill out a W-4 form for his employer (it looks like this http://www.irs.gov/pub/irs-pdf/fw4.pdf?portlet=3). That determines how much tax is taken off his check. My guess is that he probably filled it out with 2 or 3 dependents. Try to use the IRS's calculator (IRS Withholding Calculator) to determine a different dependent number to knock down the amount of tax deducted per pay.

Everything else sounds like you are continuing to move in the right direction, great job!!

BTW - did you find a bank for your direct deposit?

Thank you, that cleared it up a lot. I will talk to him and see what's going on with that. As far as I know, he hasn't filled out the forms yet as he JUST got hired (starts Monday for one and middle of Feb. for the other one.)

We are just going to have it deposited into Regions where I have an account but then when we find a new bank where we can have a joint account, we will move the money over.

**maat55** · 01-27-2009, 04:15 AM

I would holdout 500.00 for a minnie EF, then payoff the taxes, CC's and payday loan, I would consider doing the same with current tuition.

**arthurb999** · 01-27-2009, 04:54 AM

A lot of that refund is probably earned income credit... so just make sure your claiming.. married with one child... or 3.

**Tree0164** · 01-27-2009, 05:44 AM

I would take $1,000 and put it in a baby emergency fund. I would get rid of the unpaid taxes as well as payday loan. I would also use it for tutition as well. Any thing pay towards t he credit cards.

**creditcardfree** · 01-27-2009, 05:56 AM

I would save $1000 as an emergency fund and pay the debts from smallest to largest. That would leave you with money left on the cc's and the student loan. I would then make a payment plan that focuses on the two debts.

**LivingAlmostLarge** · 01-27-2009, 06:05 AM

I too think it's earned income credit or child tax credit because I doubt they pay any taxes. Skylovessea, if you don't pay income taxes at all because of low income, can you claim exempt?

Or do you claim exempt on your tax return? You might qualify on the w-4 you have to fill out for each job.

**Joan.of.the.Arch** · 01-27-2009, 07:35 AM

Originally posted by skylovessea View Post

The state taxes are definitely getting paid first (if they aren't taken out directly, which will probably happen)....

I'm not to tax savvy so I don't really understand what you mean about that second part.

Tennessee doesn't have a state income tax, so I imagine the back taxes you owe are federal. Sounds like that $158 will be taken out of what you were expecting to get this year.

If you are worried about being frivolous with your money, I suggest you go ahead and use the whole amount for your debts and recent bills. That way it will not be available to be pilfered away. There is nothing wrong with making bigger payments than the strict schedule minnie_1928 and you worked out.... However, I think you may want to set some aside as food money because with your husband's new jobs, your food stamp allotment is most likely going to decrease. You don't want to be caught unprepared. Or if you really think you cannot keep from spending it frivolously, you could use some of the money right away to stock up your kitchen to prepare for the end of food stamps....Another option would be to prepay several months of rent to secure your place to live.

Where should my tax return go?