Every year at tax time, many Americans look for help with tax resolution issues. Others are busy trying to decide what to do with their tax refund checks from the IRS. If your withholding rate is set too high, you will indeed receive a refund. It is possible to set the rate at a proper level in order to receive no refund whatsoever. Many Certified Public Accountants recommend this method. That way, you will not forgo the interest on the money. Others say, more realistically, that unless you get extremely large refunds, there is no reason to adjust your withholding amount. Just take the refund, they say, and look at it as a coerced savings system. The practical challenge comes when people try to decide what to do with the money, which comes to $3000 for the average taxpayer.
The main thing to remember is that everyone is different, thus no blanket advice can be applied to all situations. Depending whether you have big credit card balances, a mortgage, savings, college funds, student loans, children, or unusual expenses, you should take a personal financial inventory at this time. Look at where you are in your career, how many decades are left till you stop work, and what your family situation is. By examining your own circumstances closely, you will have gone a long way toward addressing the question about where to put tax refund money.
Money experts say that you should pay off credit card bills first, in most cases. Unless there is some dire emergency that just came up, get rid of the high interest on that unsecured debt. Second, make sure that in the case of a financial emergency, you have an account that would cover about half of one year's living expenses. This is an old rule of thumb that has withstood the test of time. It makes sense because it works.
If you are satisfied that savings goals and credit card debt are in good shape, then consider using at least some of the remaining tax refund cash on yourself. Some people mention 10% as an amount of the refund that they spend on themselves for a vacation, a fun purchase, or even a charitable donation. Or maybe it's time for elective dental surgery.
Whatever you do with your tax refund, at least be sure to have a plan in place before the funds arrive. By spending an hour or so at the work desk, you can avoid many problems down the road.
The main thing to remember is that everyone is different, thus no blanket advice can be applied to all situations. Depending whether you have big credit card balances, a mortgage, savings, college funds, student loans, children, or unusual expenses, you should take a personal financial inventory at this time. Look at where you are in your career, how many decades are left till you stop work, and what your family situation is. By examining your own circumstances closely, you will have gone a long way toward addressing the question about where to put tax refund money.
Money experts say that you should pay off credit card bills first, in most cases. Unless there is some dire emergency that just came up, get rid of the high interest on that unsecured debt. Second, make sure that in the case of a financial emergency, you have an account that would cover about half of one year's living expenses. This is an old rule of thumb that has withstood the test of time. It makes sense because it works.
If you are satisfied that savings goals and credit card debt are in good shape, then consider using at least some of the remaining tax refund cash on yourself. Some people mention 10% as an amount of the refund that they spend on themselves for a vacation, a fun purchase, or even a charitable donation. Or maybe it's time for elective dental surgery.
Whatever you do with your tax refund, at least be sure to have a plan in place before the funds arrive. By spending an hour or so at the work desk, you can avoid many problems down the road.
About the Author:
Experiencing tax problems with the IRS? Contact Guardian Tax Resolutions. The Guardian will help you resolve your tax issues with the IRS.