tax refunds http://www.wisebread.com/taxonomy/term/8859/all en-US 8 More Smart Things to Do With Your Tax Refund http://www.wisebread.com/8-more-smart-things-to-do-with-your-tax-refund <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/8-more-smart-things-to-do-with-your-tax-refund" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="/files/fruganomics/imagecache/250w/blog-images/2378592059_1285049505_z.jpg" alt="woman holding money" title="woman holding money" class="imagecache imagecache-250w" width="250" height="188" /></a> </div> </div> </div> <p>According to the IRS, the <a href="http://www.irs.gov/newsroom/article/0,,id=255914,00.html">average tax refund for the 2012 filing season</a> is $2,899. Although that amount is nearly $100 less than we received in 2011, it&rsquo;s still nothing to shake a stick at.</p> <p>Who couldn&rsquo;t use $3,000, right? But in order for that fast cash to make a difference, you must use it wisely.</p> <p>Before you get too excited and start burning through a check you don&rsquo;t even have yet, consider these responsible ways &mdash; an extension of last year's post on <a href="http://www.wisebread.com/8-smart-things-to-do-with-your-tax-refund">8 Smart Things to Do With Your Tax Refund</a> &mdash; to help manage your personalized stimulus package. (See also: <a href="http://www.wisebread.com/what-if-i-skip-my-taxes-this-year">What If I Skip My Taxes This Year?</a>)</p> <h2>1. Green Home Improvements</h2> <p>We're always fixing little things around the house &mdash; a squeaky door, a leaky faucet, that light bulb that always burns out &mdash; but not many of us think of the bigger picture when it comes to home improvements. When you receive your refund this year, concentrate on the long-term sustainability of your home instead of the quick fixes. Upgrading to energy-efficient appliances, installing solar panels, and building a garden are all great ways to add value to your property while preparing it for the future. The money you'll start saving on heating, cooling, and grocery bills won't hurt either. Don&rsquo;t forget to stretch your dollar even more by DIYing the improvements (you do not need to hire someone to plant tomatoes in your back yard!) and searching for the best prices possible on eco-friendly supplies.</p> <h2>2. School Loans</h2> <p>On one of the last days of class at the end of my senior year in college, I remember one of my professors asking us to reflect on the time and money we spent on our education. He asked us if we would have done it all over again given the circumstances. Emphatically, I said yes! That is, until I got the bill. I&rsquo;m being facetious, of course &mdash; I wouldn&rsquo;t trade my college experience for anything &mdash; but I wouldn't be opposed to a generous benefactor (anyone out there?) paying off my loans; despite the financial aid I received, the cost was still unbelievable. Alas, until the day comes when a rich person who&rsquo;s put me in their will kicks it, I have to send out a check every month to avoid financial ruin. Thus, I take every chance I get to send the bank extra money in order to pay off my debt off sooner &mdash; and so should you.</p> <h2>3. Big-Ticket Buys</h2> <p>One of the great parts of a windfall payday like a tax refund is that you can finally afford big-ticket items. That doesn&rsquo;t mean you should book yourself an all-expenses paid vacation, however. Use this opportunity to pick up an expensive item that you need around the house, like a new vacuum cleaner, washer and dryer, or computer. There's nothing wrong with dropping decent coin on something that will somehow make your life a little easier. If you're a small business owner buying items you'll use for work, keep the receipt. Next year that purchase will qualify as a deduction, so you definitely don't want to miss out on that.</p> <h2>4. Credit Card Debt</h2> <p>We all know that credit cards are a no-no, but sometimes they&rsquo;re a necessary evil when we&rsquo;re in a bind. If you&rsquo;ve racked up the charges on your plastic this past year, by all means try to eliminate that debt. By consistently brushing off what you owe, you&rsquo;re incurring late fees that are driving up the amount you&rsquo;re required to pay back while also hurting your credit score, which can affect your ability to buy a home, car, or anything else for which you&rsquo;ll need a loan. Just pay it off and be done with it &mdash; if only so your phone will stop ringing.</p> <h2>5. Doomsday Preparations</h2> <p>I know some of you are going to laugh at this, brush it off, and call me a kook &mdash; but you'll be sorry when the zombie apocalypse begins and you're not prepared. That's a bit tongue-in-cheek, of course, but really, how prepared are you for disasters? The walking dead aside, crisis can strike at any moment, whether it be from Mother Nature or man made, and it's not a bad idea to at least pick up the essential survival tools that one needs to make it through a week or so inside the home (or, worse, on foot) without running water, the ability to find fresh foods, or access to technology. My go-to survival-tool source is <a href="http://store.shopreadyamerica.com/disaster.html">Ready America</a>. Its prepacked bags contain everything you'll need to stay alive at an affordable price. You can thank me for the tip when we get to the zombie refugee camp.</p> <h2>6. Life&rsquo;s Necessities</h2> <p>Like with those school loans, it&rsquo;s always beneficial when you can send in extra cash on whatever outstanding debts you have (such as a car loan or mortgage). But car payments and mortgages notwithstanding, there are plenty more of life's necessities that need TLC &mdash; tender, loving cash. If you're on the hunt for a new job, don't be afraid to splurge on an interview outfit that makes you look like you mean business; the Shop It to Me blog recently published <a href="http://blog.shopittome.com/2012/04/12/dress-to-invest-pop-up-shops-for-spring/">helpful advice from frugal fashionistas</a> that will have you looking your best without going broke. For those of you with kids, well, they always need money for something; there's no time like the present to stash a bit away for a rainy day.&nbsp;</p> <h2>7. Cell Phone Upgrade</h2> <p>This may seem like a frivolous purchase &mdash; and in some regards it is &mdash; but a cell phone upgrade isn&rsquo;t all for pleasure. Because of my iPhone, I&rsquo;m able to get infinitely more work done while I&rsquo;m on the go than I would if I had one of the ancient models I used to have (remember the Motorola Razr? So primitive in hindsight). I can check and respond to e-mails, start writing new posts in the Notes, and plan my meetings, all which give me more time to concentrate when I&rsquo;m back in the office. Plus, smartphones have an excellent resale value. Since I switched to an iPhone upon its launch, I have always sold the previous model for the price I pay for the latest version when I upgrade. Zero money out of pocket is my favorite kind of buy.&nbsp;</p> <h2>8. Put It Into Savings</h2> <p>Trust me, I know that saving your tax refund and letting it sit in an invisible vault isn&rsquo;t as satisfying as handing over dead presidents to a bartender in a tropical locale, but your self-control will pay off in the long run. To make yourself feel better about your very-adult-but-no-fun-at-all decision, assign the money you're putting in the savings account toward something tangible. Maybe it's a <a href="http://www.wisebread.com/drive-the-old-car-or-buy-a-new-car">new car</a>, a down payment on a home, or another large purchase that will improve your life. When you have a goal to reach and a reason to send that money someplace you can't see it, you feel better in the short term about how being responsible totally sucks sometimes.</p> <p><em>Tell me </em>&mdash;<em> what do you plan to do with your tax refund? Make it good, and let me know in the comments below.</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/mikey-rox">Mikey Rox</a> of <a href="http://www.wisebread.com/8-more-smart-things-to-do-with-your-tax-refund">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/making-extra-cash">Ways to Make Extra Cash</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/extra-income-online-5-websites-that-can-seriously-pad-your-pockets">Extra Income Online: 5 Websites That Can Seriously Pad Your Pockets</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-smart-things-to-do-with-your-bonus">6 Smart Things to Do With Your Bonus</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/forgiven-debt-isnt-really-forgiven-at-all">Forgiven Debt Isn&#039;t Really Forgiven At All</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-pay-down-100-worth-of-debt-this-week">How to Pay Down $100 Worth of Debt This Week</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Debt Management Extra Income Taxes extra cash tax refunds windfall Tue, 17 Apr 2012 10:24:08 +0000 Mikey Rox 918785 at http://www.wisebread.com 5 Reasons Why It's OK to Get a Tax Refund http://www.wisebread.com/5-reasons-why-its-ok-to-get-a-tax-refund <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-reasons-why-its-ok-to-get-a-tax-refund" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="/files/fruganomics/imagecache/250w/blog-images/istock-happy-with-tax-refund.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p><i>Brought to you by <a target="_blank" href="http://turbotax.intuit.com/personal-taxes/online/free-edition.jsp">TurboTax Federal Free Edition &mdash; Free to prepare, Free to print, Free to efile</a>.</i></p> <p>It&rsquo;s that time of year when the mainstream media will begin chastising you for ending up with a tax refund instead of perfectly managing your prior year tax situation to avoid getting a check from Uncle Sam. To do otherwise would be giving the government a free loan, right? This view has been espoused annually like clockwork.</p> <p>The thinking goes that since you don&rsquo;t receive interest on the refund you get at the end of the year, in effect, you&rsquo;re lending the government money at a 0% interest rate when you could have been investing it yourself throughout the year. Well, I view this critique as an inability to see the forest through the trees &mdash; much ado about nothing.</p> <p>According to the <a target="_blank" href="http://www.irs.gov/newsroom/article/0,,id=231381,00.html">IRS</a>, the average tax refund was $2994 last year, a slight increase over the year prior. Based on this amount and the rationale below, you may end up feeling a little less guilty this year when you collect your refund check this spring. (See also: <a target="_blank" href="http://blog.turbotax.intuit.com/tax-tips/find-out-when-your-refund-will-be-sent/03152011-5230">Find Out When Your Tax Refund Will Be Sent</a>)</p> <p><b>It&rsquo;s Nearly Impossible to Get it Just Right</b></p> <p>With all the various tax credits, deductions, multiple sources of income and other facets of our complex tax code, the odds of setting your withholding perfectly during the year to end up anywhere near a zero refund are quite low. Personally, I view this as a futile exercise, especially if it&rsquo;s a difference of a few hundred dollars in the end. Couldn&rsquo;t your time be spent on something more productive? If you put that sort of time and effort into researching ways to earn some extra money on the side, figuring out ways to save more money, or optimizing your existing investments, that may be a much better use of your time and resources. (See also: <a target="_blank" href="http://turbotax.intuit.com/tax-tools/tax-tips/Tax-Deductions-and-Credits/The-10-Most-Overlooked-Tax-Deductions/INF12062.html">10 Most Overlooked Tax Deductions</a>)</p> <p><b>The Free Government Loan Doesn&rsquo;t Matter at These Rates</b></p> <p>While many people irrationally focus so much on NOT paying taxes that they actually make poor investment decisions (like selling &ldquo;losers&rdquo; in December for the tax loss, even if it doesn&rsquo;t align with their long-term investment strategy) or make charitable donations they can ill afford, likewise, some people abhor the idea of &ldquo;loaning&rdquo; the government free money so much that they can&rsquo;t envision themselves receiving a refund the next year under any circumstances.</p> <p>The reality is interest rates are at historic lows. With the average refund above of close to $3000, considering the fact that this amount is accrued across the whole prior year, let&rsquo;s say at an annualized rate you&rsquo;re &ldquo;lending&rdquo; the government $1500. With the risk-free interest rate over a 1 year period sitting at under 2%, you&rsquo;re talking about foregoing income of around $30 or less. The horror!</p> <p><b>A Forced Savings Account is Better Than Nothing</b></p> <p>Right or wrong, many people find it so difficult to save throughout the year that a tax refund acts as a forced savings account. This extra money they would have taken home otherwise is basically written off throughout the year as background noise, especially since it&rsquo;s often a complete mystery just what the refund will be come spring. With that in mind, many families go through the year using after-tax income on necessities and retirement contributions but the come spring &mdash; refund!</p> <p><b>It&rsquo;s an Automatic Emergency Fund</b></p> <p>With so few Americans having a sizable emergency fund, why not use this year&rsquo;s refund to kick off such a vehicle in the event of job loss, medical emergency or other unforeseen circumstances? Since small monthly surpluses are so easy to spend and make for tough emergency fund investments, this method of getting a mini-windfall in the spring is a much more tangible and impactful way to kick it off. While this year&rsquo;s refund might only be equivalent to a month&rsquo;s income or so, it&rsquo;s a start!</p> <p><b>It Beats OWING Money!</b></p> <p>Realistically, it&rsquo;s unlikely that you&rsquo;ll hit it just right, especially if you have investment transactions, income from savings accounts or CDs, a bonus, credits, deductions and other myriad taxable events throughout the year.&nbsp;With this in mind, would you rather risk actually owning money? Coming out of a costly holiday season and heading into summer, I&rsquo;d much rather be seeing money coming in than going out at this time of year.</p> <p>At the end of the day, you can fault the government for their taxation policies and where money gets spent, but is it really worth burdening yourself with trying to micromanage a tax return when the downside cost equates to peanuts? By taking a look at this <a target="_blank" href="http://turbotax.intuit.com/tax-tools/tax-tips/IRS-Tax-Return/Summary-of-Federal-Tax-Law-Changes-for-2010-2017/INF12041.html#2011">summary of Federal tax law changes for 2010</a>, it&rsquo;s evident it&rsquo;s more work trying to keep up with the latest moving target than just focusing on the low-hanging fruit.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/darwins-money">Darwins Money</a> of <a href="http://www.wisebread.com/5-reasons-why-its-ok-to-get-a-tax-refund">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-great-places-to-get-free-tax-advice">6 Great Places to Get Free Tax Advice</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/warning-turbotax-missing-minnesota-tax-info">Warning: TurboTax Missing Minnesota Tax Info (Updated With TurboTax Response)</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-smart-things-to-do-with-your-tax-refund">8 Smart Things to Do With Your Tax Refund</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-more-smart-things-to-do-with-your-tax-refund">8 More Smart Things to Do With Your Tax Refund</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-things-everyone-should-know-about-this-years-tax-changes">5 Things Everyone Should Know About This Year&#039;s Tax Changes</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Taxes tax refunds turbotax Mon, 21 Mar 2011 16:00:09 +0000 Darwins Money 507883 at http://www.wisebread.com Receiving Your Tax Refund in Savings Bonds http://www.wisebread.com/receiving-your-tax-refund-in-savings-bonds <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/receiving-your-tax-refund-in-savings-bonds" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="/files/fruganomics/imagecache/250w/blog-images/iStock_000002531778Small.jpg" alt="Woman putting money in a piggy bank" title="Woman putting money in a piggy bank" class="imagecache imagecache-250w" width="250" height="157" /></a> </div> </div> </div> <p>As you prepare your tax return this year, you have an interesting option. You can opt to receive part of your tax refund as U.S. Savings Bonds. The process is relatively simple.&nbsp;<a href="http://www.irs.gov/pub/irs-pdf/f8888.pdf">Form 8888</a>&nbsp;(PDF) from the IRS allows you to allocate how you will receive your refund. You can have your refund directly deposited into a bank account, mailed to you as a check, or invested directly into savings bonds. You can also divide your refund between these options however you'd like. It's an easy process. The real question is should you invest part of your refund into savings bonds.</p> <p>The bonds in question are Series I Savings Bonds, which the U.S. Treasury sells for face value. You can redeem such a bond, plus the accumulated interest on it, after twelve months have passed &mdash; although if you redeem a bond you've held less than five years, you'll give up three months worth of interest. Series I Bonds earn a combination of a fixed rate and an inflation rate. The fixed rate stays the same for the life of the bond, while the inflation rate changes every six months. New rates are set every November and May. The last fixed rate set (November 2010) is 0.00 percent, which means bonds bought before next May will be relying entirely on their inflation rate for income. You can see a list of <a _mce_href="http://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds_iratesandterms.htm" href="http://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds_iratesandterms.htm">recent rates</a>&nbsp;on the U.S. Treasury's website. (See also: <a href="http://www.wisebread.com/while-waiting-for-rates-i-bonds">While Waiting for Rates: I-Bonds</a>)</p> <h3>The Benefit of Automatic Savings with Bonds</h3> <p>Sarika Abbi, who works with the <a _mce_href="http://www.d2dfund.org/" href="http://www.d2dfund.org/">D2D Fund</a>&nbsp;to encourage savings for low-income consumers, points out that this approach provides a way to automatically save money.</p> <blockquote><p>The nice thing is a taxpayer can consider saving just a portion of their refund with bonds, allowing them to use the remainder to pay bills, meet spending needs, or save in other saving or investment vehicles. For individuals who don&rsquo;t have access to savings, it&rsquo;s a great way to begin setting some aside for the future, without the requirement of a bank account. They also offer a competitive rate in comparison to comparable savings products (traditional savings account and one-year CDs). There are no fees associated with buying or redeeming bonds and they have a low entry point: only $50. This makes them a very accessible product for many households.</p> <p>Tax-time saving bonds are Series I Savings Bonds, which are inflation-protected. This means your savings bond never lose value. They are also very safe investments &mdash; your principal is protected and when you redeem them you will receive your entire principal as well as any interest earned. They are a nice long-term vehicle (mature in 30 years) but are accessible one year after purchase if a family faces an emergency or need for the vehicle. It is also a good savings vehicle for individuals who want to set money aside for their children, grandchildren, or other loved ones. And there is a tax break if used for education purposes.</p> </blockquote> <p>It's truly an easy way to build up savings, and the fact that it takes a little more work to cash in a bond than it takes to just transfer money out of a checking account means that there's an additional barrier to using your savings for purchases that aren't really all that necessary. There is a maximum amount that you can invest in Series I bonds every year &mdash; $5,000 &mdash; but a taxpayer can request as little as $50 in bonds if that's all someone wants to put aside.</p> <h3>Is Getting Your Refund in Savings Bonds Right for You?</h3> <p>It's true that savings bonds, especially at current interest rates, aren't the ideal investment for everyone. But when you consider that you can use them as a savings vehicle rather than an investment opportunity, you may find that putting part of your income tax refund towards savings bonds makes sense. You may find that you can earn at least as much interest as you can through a savings account at your bank. And if you're starting to plan for college for a little one, a savings bond offers other <a href="http://www.wisebread.com/college/college-savings-bonds">benefits over the typical bank account</a>.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/thursday-bram">Thursday Bram</a> of <a href="http://www.wisebread.com/receiving-your-tax-refund-in-savings-bonds">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/did-your-parents-give-you-a-whole-life-insurance-policy-heres-what-to-do-with-it">Did Your Parents Give You a Whole Life Insurance Policy? Here&#039;s What to Do With It.</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-smart-things-to-do-with-25">10 Smart Things to Do With $25</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/tips-and-i-bonds">TIPS and I-Bonds</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/one-simple-trick-to-get-the-best-tax-benefit-from-your-retirement-portfolio">One Simple Trick to Get the Best Tax Benefit From Your Retirement Portfolio</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/tax-penalties-for-early-retirement-withdrawals">Tax Penalties for Early Retirement Withdrawals</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment Taxes college savings savings bonds tax refunds Fri, 04 Mar 2011 12:00:30 +0000 Thursday Bram 499912 at http://www.wisebread.com