After the paperwork gathering and meeting with the tax preparer
is over and done with, most Americans happily anticipate their refund from the IRS. Current economic conditions have made households rethink how they spend their cash windfall, with more adults opting to put it toward savings or pay down outstanding debt.
According to a recent survey conducted by the National Retail Federation, 43.8 percent of taxpayers questioned said they plan to put all or a portion of their refund into a savings account, an increase from last year's 42.1 percent. In addition, 39.4 percent said they will use the funds to pay down debt, while 28.7 percent will rely on the refund to pay for everyday expenses.
"After a rocky few years, consumers are now more vigilant about how they spend their money and the importance of preparing for future financial stability," said NRF president and CEO Matthew Shay.
However, there are several other ways individuals can use their refund to not only boost their financial well-being, but improve their tax situation for next year, according to Daily Finance. For example, adults who have not maxed out their retirement contributions can still put money toward their individual retirement account or Roth IRA to reap the tax benefits.
In keeping with the savings theme, taxpayers can also elect to use all or a portion of their refund to purchase Series I Savings Bonds, which are issued by the Department of the Treasury. Adults may purchase the bonds in $50 multiples for either themselves or others, such as their children or grandchildren. The maximum amount individuals can purchase in a calendar year is $5,000 worth of paper bonds.
Adults who expect to have a high number of medical expenses that may not be covered by health insurance can also use some of the money to put toward a flexible spending account. Some limitations will be placed on these accounts in 2013, making 2012 the last year that certain costs, such as orthodontist services, can be covered by FSA funds, according to Daily Finance. For this reason, individuals who plan on seeking out big medical services that will no longer fall under the umbrella of FSA's can save money by taking advantage of them now.
Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.
About Liberty Tax Service
Liberty Tax Service is the fastest -growing retail tax preparation company in the industry’s history. Founded in 1997 by CEO John T. Hewitt, a pioneer in the tax industry, Liberty Tax Service has prepared over 8,000,000 individual income tax returns. With 42 years of tax industry experience, Hewitt stands as the most experienced CEO in the tax preparation business, having also founded Jackson Hewitt Tax Service.
Liberty Tax Service is the only tax franchise on the Forbes “Top 20 Franchises to Start,”
and ranks #1 of the tax franchises on the Entrepreneur “Franchise 500.” Each office provides computerized income tax preparation, electronic filing, and online filing through eSmart Tax.