It’s tax season, which means it’s tax refund season, too. Nearly 80% of U.S. tax filers will get a federal income tax refund, with the average amount rising to more than $3,000.
You might think that many Americans are itching to blow that three grand on some extravagant purchase. Once that refund hits their bank account, they’re probably psyched to go shopping! Clearly it’s time to splurge on a big-screen TV or an island vacation or a new rec room in the basement, right?
Turns out most of us will use our tax refunds for savings, paying down debt or just paying our bills.
A new survey of U.S. taxpayers from Bankrate.com found the following:
- 90% of those expecting refunds say they’ll use the money for something practical.
- 34% will save or invest the money.
- 29% will use it to pay bills or buy food.
- Only 6% plan to use their refund money to splurge on indulgences.
- About 25% of survey respondents had already filed their taxes by mid-February.
- Millennials were most likely to be both early filers and savers.
Bankrate Is Not Amused
Now, that might seem like relatively good news at first blush, financially speaking. Hey, Americans are being somewhat responsible! They aren’t all blowing their tax refunds on black light posters and tequila shots!
But Bankrate.com isn’t impressed. The financial data aggregator published the results of this survey on its website under the headline “You’re doing it wrong.”
Bankrate strongly recommends that, instead of getting a tax refund every year, you adjust your withholding so you won’t get a refund next year.
“Having too much income tax withheld from paychecks will produce a larger refund, but it means we’re surrendering our money all year in a 12-month interest-free loan to the federal government,” it says.
That’s certainly something to consider. In the meantime, though, most of us are getting refunds.
Four out of five of us will receive our refunds via direct deposit instead of a paper check. E-filing your tax return together with direct deposit is the fastest way to get your refund. The IRS says it’ll pay 9 out of 10 refunds within three weeks of filing.
If you’ve already filed your taxes but haven’t received your refund yet, you can use the IRS’s “Where’s My Refund?” tool to check on it.
And finally, in the name of sanity and responsibility, here are eight respectable ways you might consider using your tax refund. Bankrate still wouldn’t approve, though.
Your Turn: What are you going to do with your tax refund?
Mike Brassfield ([email protected]) is a senior writer at Codetic. He gets a tax refund every year — damn the torpedoes.