Money Girl

166 What To Do With a Tax Refund

If you're like the majority of U.S. taxpayers, you've got a tax refund coming. Find out how to get help with your taxes, get your refund as quickly as possible, and what you should do with it. Like what you hear? Help us out by writing a review at iTunes. Questions go to money@qdnow.com. Thank you!

Broadcast on:: 24 Mar 2010
Audio Format:: other

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Contact us before canceling entire account to continue bill credits or credit stop and balance on a required finance agreement to bill credits and if you pay off devices early, ctmobile.com. Hi, everyone, and welcome back to Money Girls Quick and Dirty Tips for a richer life. I'm your host, Laura Adams. According to the IRS, more than 70% of taxpayers receive an income tax refund. Would you believe that the average refund is expected to be in the neighborhood of $2,800 this year? That's a big chunk of change. In this post, I'll help you make the most of your refund from Uncle Sam. Okay, let's talk refunds. If you're expecting a tax refund, you obviously want to get it as quickly as possible. That way you can put it to work for you sooner rather than later. The fastest and safest way to get your tax refund is to submit your return online using e-file. I'll tell you more about how e-file works in just a moment. If you e-file and request a direct deposit, you'll probably receive your funds in less than 10 days. But if you submit a paper return and request a direct deposit or a paper check, it could take several weeks longer. Plus, you run the risk that your tax forms or a refund check could get lost or stolen in the mail. If you don't receive your refund, it's important that you make an inquiry about it using the IRS Refund Status tool at irs.gov. By the way, I'll put a link to all the tools and forms that I mentioned in this show on the MoneyGirl blog at moneygirl.quickandertietips.com. There are three ways to file your tax return electronically. The first is to use your own tax software. Most tax programs include the option to submit your return by e-file. Or you could use a tax preparer. You can find an authorized e-file tax professional by clicking through a link on the IRS homepage at irs.gov and entering your zip code. And the third way is to use free file at the IRS website. You'll find it at irs.gov/freefile. There are two options depending on your income. If you or your family's adjusted gross income is less than 57,000 in 2009, you qualify for traditional free file, which is the IRS's free online tax software. It takes you step by step through a series of questions and completes your tax forms with the data you enter. Or if your adjusted gross income is more than 57,000, you can still submit your return online at the IRS site using the free file fillable forms, which are the blank electronic versions of the paper forms. You'll have to choose the appropriate form and fill it out yourself without the help of software. That means you'll need to pay close attention and double check your math. If you have questions and need assistance with your tax return, you can find free help at a local IRS taxpayer assistance center. Go to irs.gov for those locations and their business hours. Low and moderate income taxpayers may qualify for free tax preparation services through volunteer programs in many communities. Again, find out more at the IRS website at irs.gov or by calling 1-800-TACS-FORM. Kendra manages your payroll. She's also six weeks pregnant. Maybe it's time for a group dental plan with extra TLC for moms to be. Grin from within, United Concordia Dental. Learn more at grin with ucd.com products under written by United Concordia Insurance Company. Whether you're scouring business financial sites or listening to economics podcasts like this one, you'll find there's no secret to successfully managing your company's finances for the future. You just need PNC corporate and institutional banking, whose team of dedicated relationship managers bring 160 years of experience, advice, and an array of tools and tech to scale to any size business. PNC Bank, brilliantly boring since 1865. PNC Bank, National Association, member FDIC. My dad works in B2B marketing. He came by my school for career day and said he was a big row as man. Then he told everyone how much he loved calculating his return on ad spend. My friends still laughing me to this day. Not everyone gets B2B, but with LinkedIn, you'll be able to reach people who do. Get a hundred dollar credit on your next ad campaign. Go to linkedin.com/results to claim your credit. That's linkedin.com/results. Terms and conditions apply. LinkedIn, the place to be, to be. Once you receive your refund, there are a gazillion things you can do with it. Taking a vacation, going on a shopping spree, and buying expensive bottles of wine immediately come to mind. But I bet you won't be surprised if I tell you that the best thing you can do with the money is to save it. It might not be as much fun as many other options, but it will certainly go a long way towards improving your personal finances. Here are my recommendations for what to do with your tax refund in the order of priority. Number one, add it to your emergency fund. One of the most important defenses you have against unexpected expenses or the loss of income is a cushy emergency fund equal to at least six months worth of your living expenses. If you don't have a reserve fund, or if it's not as big as it should be, make sure that's the number one priority for your tax refund. Number two, purchase health insurance. If you don't have health insurance, consider using your tax refund to pay premiums for an affordable policy, such as a high deductible health plan. That's the kind of policy that also gives you the ability to open up a tax-advantaged health savings account. Number three, pay down high interest debt. If you have at least a few months worth of living expenses saved in an emergency fund, but also have expensive consumer debt like credit cards, retail store cards, or payday loans, use your tax refund to pay them down. Number four, fund an IRA. If you don't have an IRA, which stands for individual retirement arrangement, use your tax refund to start one. You can contribute up to $5,000 to an IRA in 2010, or 6,000 if you're age 50 or older. Be aware that there are tax penalties for withdrawing money from a retirement account before the age of 59 and 1/2, so be sure to put money in an IRA only after you've established an emergency fund and are sure you won't need the money. And five, fund a 529 education savings account. If you're saving money for your own education or that of a child's, consider putting your tax refund in a 529 plan. Funds in a 529 grow completely tax-free if you spend them on qualified education expenses. You can learn more about 529s at savingforcollege.com. You can even opt to split up your refund and have it automatically deposited into multiple financial accounts, like an IRA and a savings account using IRS form 8888. If you just want to have the money sent to one account, simply use the direct deposit line that's on the regular tax form. An important quick and dirty tip is that if you consistently get big tax refunds each year, you probably need to adjust your withholding, so less tax will be deducted from your paychecks. Use the IRS withholding calculator to help you complete a new form W4 and submit it to your employer. Remember that it's not a good idea to use a tax return as a forced savings plan. It's better to pay yourself first with higher paychecks throughout the year. That way, you can save the amount you'd otherwise be paying to the government and make interest on it, instead of loaning it to Uncle Sam for free. I want to thank everyone who's downloaded my newest audiobook Money Girls 10 Steps to a Debt-Free Life. Learn how easy it is to get out of debt and stay out of debt for good. You'll find out which debts to pay off first, when to refinance, how to raise your credit score, cut costs, and lots more. Take control of your finances and create a more secure future. Get your copy of Money Girls 10 Steps to a Debt-Free Life today at audible.com or in the iTunes store. Visit the Money Girl section at quickanddirtytips.com for links to the information mentioned in this show. Additional resources that I didn't mention, all my contact information, links to my Facebook and Twitter pages, and lots more. I'm glad you're listening. Sha-ching! That's all for now. Courtesy of Money Girl, your guide to a richer life. Hey Denver, not ready to end that trip? Fly southwest with no change or cancel fees. So, this sun-kissed couple can stay in vacay mode longer. Reality? Oh, that can wait. And this outdoorsy guy can get home early to catch that sunset hike. Plus an amazing view! While this hard worker can add one more out of office day. And I'm not checking my email. 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