tax refunds http://www.wisebread.com/taxonomy/term/8859/all en-US Most Popular Ways Americans Spend Their Tax Refunds http://www.wisebread.com/most-popular-ways-americans-spend-their-tax-refunds <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/most-popular-ways-americans-spend-their-tax-refunds" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-492675012.jpg" alt="Here are the most popular ways Americans spend their refunds" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>According to the IRS, the <a href="https://www.irs.gov/uac/newsroom/filing-season-statistics-for-week-ending-feb-26-2016" target="_blank">average tax refund in 2016</a> was $3,053. While we here at Wise Bread generally advise against giving the government a free loan all year, there's no arguing that a tax refund can go to good financial use. But how, exactly do most Americans spend their newfound chunk of change?</p> <h2>What do most people spend on?</h2> <p>Fortunately, the majority of people use their tax refund to pay down debt, save, or invest. In a poll conducted by GoBankingRates, 41 percent of people deposited the money into their savings account and 38 percent used it to pay off debt.</p> <p>More than half of millennials plan to use their refunds for savings and debt repayment. This is a major change from previous years, when the tendency for this age group was to spend on splurge purchases (clothes, video games, new shoes, etc.). Gen Xers are the second group behind millennials most likely to use their refund for debt repayment, and younger Gen Xers (35&ndash;44) are the second most likely behind boomers to fund a vacation. While baby boomers age 65+ are less likely to receive a refund, they are currently more likely to spend it on a vacation or splurge purchase than other generations. Despite more boomers spending on themselves, 42 percent still allocate their refund to savings.</p> <h2>Smart ways to use your refund</h2> <p>If you're getting a tax refund this year, you might be tempted to splurge. While there's nothing wrong with treating yourself once in awhile, your money would be better spent in these smart ways.</p> <h3>Boost your emergency fund</h3> <p>You should have three to six months' worth of expenses saved for a <a href="http://www.wisebread.com/a-step-by-step-guide-to-creating-your-emergency-fund?ref=internal" target="_blank">financial emergency</a>. If your savings account could use some padding, this is the perfect time to save without feeling the burn. Your future self will be grateful for your savviness. (See also: <a href="http://www.wisebread.com/50-smart-things-to-do-with-your-tax-refund?ref=seealso" target="_blank">50 Smart Things to Do With Your Tax Refund</a>)</p> <h3>Pay down debt</h3> <p>According to a GoBankingRates survey, the top source of financial stress for Americans is paying off debt. Fortunately, your tax refund can help ease that stress. Consider using the money to make an extra mortgage or student loan payment, or help tackle your <a href="http://www.wisebread.com/5-ways-to-pay-off-high-interest-credit-card-debt?ref=seealso" target="_blank">high-interest credit card debt</a>. (See also: <a href="http://www.wisebread.com/fastest-way-to-pay-off-10000-in-credit-card-debt?ref=seealso" target="_blank">Fastest Way to Pay off $10K in Credit Card Debt</a>)</p> <h3>Invest it</h3> <p>If you already have an emergency fund to fall back on, then consider using your refund to pad your retirement accounts or other investments. You can also begin diversifying your portfolio to mitigate risk and potentially increase your returns.</p> <h3>Invest in yourself</h3> <p>If you've considered taking classes, focusing on your hobbies, getting in shape, or starting a small business, then it might be worth using your refund to fund these ventures. By investing in yourself, you'll continue benefiting from the refund over time.</p> <h3>Make small home improvements</h3> <p>Have you been putting of small fixes around the house? It's time to tackle them now before they turn into a bigger problem. Simple upgrades are not expensive, and can result in a higher resale value and future tax benefits. (See also: <a href="http://www.wisebread.com/10-cool-diy-home-improvements-for-20-or-less?ref=seealso" target="_blank">10 Cool DIY Home Improvements for $20 or Less</a>)</p> <h3>Donate it</h3> <p>If you're feeling financially secure in your own life, consider paying the funds forward. Donating your refund to a worthwhile charity ensures that the money is going to great use. It can also reduce your taxable income for the next tax season. (See also: <a href="http://www.wisebread.com/can-i-write-it-off-as-charity?ref=seealso" target="_blank">Can I Write It Off as Charity?</a>)</p> <h3>Treat it like a paycheck</h3> <p>Figure out how much of your paycheck you allocate to certain expenses each month (food, mortgage, gas, etc.) and treat your tax refund the same. Don't forget to include any debt payments. Just like a typical paycheck, you might even have a small amount leftover to use for something fun.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/andrea-cannon">Andrea Cannon</a> of <a href="http://www.wisebread.com/most-popular-ways-americans-spend-their-tax-refunds">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-7"> <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/beware-these-6-phony-irs-calls-and-emails">Beware These 6 Phony IRS Calls and Emails</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/5-times-splurging-on-experiences-is-a-bad-idea">5 Times Splurging on Experiences Is a Bad Idea</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/i-lost-my-tax-documents-now-what">I Lost My Tax Documents… Now What?</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/5-important-tax-changes-for-2016">5 Important Tax Changes for 2016</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/12-personal-finance-skills-everyone-should-master">12 Personal Finance Skills Everyone Should Master</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Taxes debt repayment investments IRS saving money spending habits splurges tax refunds Mon, 03 Apr 2017 08:30:18 +0000 Andrea Cannon 1917304 at http://www.wisebread.com Beware These 6 Phony IRS Calls and Emails http://www.wisebread.com/beware-these-6-phony-irs-calls-and-emails <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/beware-these-6-phony-irs-calls-and-emails" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-509629604.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="143" /></a> </div> </div> </div> <p>It's 2017. Most people aren't really thinking of filing taxes just yet, but they are starting to collect the information needed to file by the April deadline. That means the scammers are out in force again, ready to trick millions into submitting personal information, or to make payments that will go into the pockets of thieves.</p> <p>These six scams are the biggest offenders, and once again, they'll be used widely this year. Watch out for them.</p> <h2>1. The &quot;You've Got a Refund&quot; Email</h2> <p>Who doesn't love getting money back from the IRS? When you get this one in your inbox, you could certainly be fooled into thinking it's legitimate. Unlike many of the phishing emails, it appears to have decent grammar, it's well formatted, and it has something of an official look to it. What's more, the <a href="https://www.irs.gov/pub/irs-utl/phishing_email.pdf" target="_blank">refund isn't huge</a>. If it had stated you were getting many thousands back, you may pause for thought. But a small sum, under $100, is less likely to trigger alarm bells. It all seems legit. But, it's not. And by clicking the link in the email, you are going to a fraudulent site designed to collect personal and banking information.</p> <p>As the IRS clearly states on its website, it will never initiate contact with taxpayers over email, text messages, or social media channels. The main contact is snail mail, and while you may get actual calls, they will be easy to verify (more on that later).</p> <p>Do not look at the &quot;from&quot; email address, either. These can be simulated to look like they have come from an official agency. Look at the link address in the email; this will definitely be going to a site that tries to look official, but isn't, such as <a href="http://www.irs-gov.com/refund" title="www.irs-gov.com/refund">www.irs-gov.com/refund</a>. The bottom line: Any kind of &quot;you've got a refund&quot; email from the IRS is a scam, and should be <a href="https://www.irs.gov/uac/report-phishing" target="_blank">reported to them immediately</a>.</p> <h2>2. The &quot;The Bill Was Lost in the Mail&quot; Call</h2> <p>If you receive a call from the IRS saying you owe money, it's a scam. That's just a hard fact. The IRS clearly states on its website that it will never call you if you owe taxes, without first sending you a bill in the mail. Of course, thieves are getting wise to this being common knowledge, and are now saying that the bill must have gotten lost in the mail.</p> <p>At this point, you may well be put into a world of self-doubt; and that's when the scammer jumps on the opportunity. They hear the hesitation in your voice, and start alarming you. They will say that as the bill has been long overdue, you are now in serious trouble. You have to pay the back taxes immediately or risk going to jail. It's at this point that many people become so scared that they pay up. This is all a con, and you can easily verify this.</p> <p>For starters, a real IRS agent will not ask for money over the phone. If this is the request, hang up. They also will not threaten you with arrest or deportation. You can also ask for their IRS badge number and call back number. The scammer will hang up on you.</p> <h2>3. The &quot;Affordable Care Act&quot; Email</h2> <p>One of the downsides of the Affordable Care Act is that it is still quite new, and therefore, has many unknowns. There is even a page on the IRS website dedicated to the intricacies surrounding the <a href="https://www.irs.gov/affordable-care-act/individuals-and-families/the-affordable-care-act-whats-trending" target="_blank">new health care law</a>; and that is perfect fodder for a scammer. Where there is doubt, there is a chance to profit.</p> <p>The scam will come as an email (and in some rare cases, a letter) alerting you to something called a CP2000 notice. It's worth noting that this is, in fact, a real type of notice. But in this case, it's completely fake. The big giveaway is that it is issued from an Austin, Texas address, with a phony payment voucher number called a 105C.</p> <p>The scam uses language designed to scare you into paying the bill, and here's another huge red flag &mdash; the check should be made payable to &quot;I.R.S.&quot; at an Austin Processing Center address. If you receive anything like this via email, forward it to the IRS. They are currently <a href="https://www.irs.gov/uac/irs-and-security-summit-partners-warn-of-fake-tax-bill-emails" target="_blank">investigating this nasty scam</a>.</p> <h2>4. The &quot;Please Verify Your Tax Information&quot; Call</h2> <p>Not all IRS scams are designed for immediate profit. This one is designed to harvest your personal information, which can then be used for identity theft, or to actually grab a refund owed to you before you even claim it. In 2013, the IRS paid out over <a href="http://www.gao.gov/products/GAO-15-119" target="_blank">$5.8 billion in stolen tax refunds</a>, and the problem is not going away.</p> <p>As the scammer is not asking you to pay a bill, it can feel much less threatening. The fake agent will be very polite, and will say that the IRS needs to verify some information on a tax return you previously filed. They may even have some personal information that makes it sound like they have your file right there in front of them. But, the information they really want, like your SSN or bank details, will not be available.</p> <p>Questions will start out simple: &quot;I have your name as John S. Doe, could you spell that please?&quot; But this will quickly lead to &quot;And could you verify your social security number for me?&quot; At this point, the scammer won't have anything to work with, and is hoping you simply parrot back the response.</p> <p>Remember, the IRS will not call you asking for this kind of information. If you do have an issue with a former return, you will get an official notice in the mail, asking for the information to be verified. And if you doubt that, call the IRS directly.</p> <h2>5. The &quot;IRS Taxpayer Advocate&quot; Email</h2> <p>In 2014, the IRS warned of a new scam that was designed to solicit personal information, leading to identity theft and stolen tax refunds. This is known as the &quot;<a href="https://www.irs.gov/uac/newsroom/irs-warns-of-new-email-phishing-scheme-falsely-claiming-to-be-from-the-taxpayer-advocate-service" target="_blank">IRS Taxpayer Advocate Service</a>,&quot; and comes complete with a legitimate-looking case number, and language designed to grab sensitive personal and financial information.</p> <p>The email, which comes with a &quot;from&quot; address designed to look real, tells you that a former tax return you filed was flagged for review due to a document processing error. Once again, you will always be notified of any problems like this via regular mail, not email.</p> <p>The email will then say that you must click on a link to submit the missing or erroneous information, which will expedite the filing of the return to avoid any fees or charges. Of course, that link leads to a page hosted by the scammer, designed to collect and abuse your information.</p> <h2>6. The &quot;Federal Student Tax&quot; Call</h2> <p>A new tax scam surfaced last year, and it sadly tricked a few unsuspecting people into handing over iTunes gift cards, W-2 information, or tax return data. If that sounds a bit obvious, it's all done in a way that makes it feel legitimate.</p> <p>The scammer will call a student and tell them that they owe &quot;Federal Student Tax,&quot; which must be paid immediately. There's no such thing as the Federal Student Tax. It's a complete fabrication.</p> <p>However, the scammers have become much more sophisticated. For example, they are using caller ID spoofing to make the call look like it is coming from an official government line. Plus, information made available on the dark web can give them all sorts of information about the student's background. Together with a very professional sounding &quot;agent,&quot; this can all work to convince the student the tax must be paid. And often, they request the money in the form of gift cards, which is another huge red flag. Again, the IRS won't call and ask for money. If this is happening to you, or someone you know, tell them to hang up and <a href="https://www.irs.gov/uac/report-phishing" target="_blank">report the incident to the IRS</a>.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/paul-michael">Paul Michael</a> of <a href="http://www.wisebread.com/beware-these-6-phony-irs-calls-and-emails">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/what-to-do-when-you-suspect-a-scam">What to Do When You Suspect a Scam</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/how-to-choose-the-best-tax-preparer">How to Choose the Best Tax Preparer</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/how-to-spot-a-charity-scam-from-a-mile-away">How to Spot a Charity Scam From a Mile Away</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/top-three-tax-facts-to-know-for-2016">Top Three Tax Facts to Know for 2016</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/most-popular-ways-americans-spend-their-tax-refunds">Most Popular Ways Americans Spend Their Tax Refunds</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Taxes emails fraud IRS phishing scams safety scams tax refunds theft Wed, 25 Jan 2017 11:00:08 +0000 Paul Michael 1878111 at http://www.wisebread.com 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="http://wisebread.killeracesmedia.netdna-cdn.com/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-4"> <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/10-easiest-items-to-flip-for-cash">10 Easiest Items to &quot;Flip&quot; for 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/7-surprising-ways-to-earn-money-online">7 Surprising Ways to Earn Money Online</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-ways-to-earn-extra-money-with-a-healthy-lifestyle">5 Ways to Earn Extra Money With a Healthy Lifestyle</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/is-starting-a-small-business-for-the-tax-deductions-worth-it">Is Starting a Small Business for the Tax Deductions Worth It?</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/beware-these-6-phony-irs-calls-and-emails">Beware These 6 Phony IRS Calls and Emails</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="http://wisebread.killeracesmedia.netdna-cdn.com/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-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/5-things-tax-preparers-should-tell-you">5 Things Tax Preparers Should Tell You</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/beware-these-6-phony-irs-calls-and-emails">Beware These 6 Phony IRS Calls and Emails</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/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-5 views-row-odd views-row-last"> <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> </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="http://wisebread.killeracesmedia.netdna-cdn.com/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-5"> <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/how-carried-interest-may-affect-our-taxes">How &quot;Carried Interest&quot; May Affect Our Taxes</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/tax-penalties-for-early-retirement-withdrawals">Tax Penalties for Early Retirement Withdrawals</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/beware-these-6-phony-irs-calls-and-emails">Beware These 6 Phony IRS Calls and Emails</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/4-ways-to-reduce-your-tax-bill-with-bonds">4 Ways to Reduce Your Tax Bill With Bonds</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