Ways To Spend Your Tax Refund

Were you one of the lucky ones who got an IRS tax refund this year? Currently, the average refund issued by the IRS in 2019 is $1,949. Some refunds might be more substantial, while others might be smaller, but there are smart ways to use your tax refund. Do you owe the IRS back tax debts? If you owe any back taxes, settle those first with as much of your tax refund as you can. Most of us will want to spend our refund right away. However, carefully managing your refund can set you up for better financial shape in the future. Here are some smart ways to use your tax refund this year.

Pay Down Back Taxes

As we mentioned above, pay down back taxes with your tax refund. If you pay down your back taxes, you will have less overall money that you owe. When you owe back taxes, interest and penalty charges will soon add up. If you don’t have back taxes, you can use your refund to pay off credit card debt. The average interest rate on new credit cards is over 15 percent. Many credit card rates charge higher than 15 percent. Did you pay a tax debt in the past with a credit card? If you did, that’s even more of a reason to pay down your debt. Paying down back tax debt is one of the smartest money management moves for your tax refund. Similarly, paying off credit card debt is also a smart move.

Save An Emergency Fund

You should have three to six months’ work of expenses saved in an emergency fund. An emergency fund can be helpful if you ever have back tax debt to pay. Even if you can’t spare that much, saving some is better than none. Open an emergency account if you don’t have one and keep at least half of your refund. When you get a big tax bill next year, you’ll be glad you have savings. Alternatively, if your car breaks down or you incur unexpected medical bills, you will be happy to have savings.

Put Money Into Retirement

If you don’t have back tax debt to pay, you can put money into a retirement account. Remember, if you have extra money via a tax refund, pay off debt first. A tax resolution specialist can help you pay off the back tax debt. However, if you are lucky and debt-free, start saving for retirement. Even if you have a 401K through work, you can open your retirement account. As long as you and your spouse make less than $181,000 a year, you can contribute up to $5,500 per year. If you are 50 or older, you can save $6,000 or $7,000 per year. If you start saving for retirement now, your older self will thank you.

Invest your Refund

If you don’t have back tax debt to pay off, you can invest your refund. You can open a brokerage account and start investing with your tax refund. There are online stock brokers that are affordable and efficient for small investors. However, you should only consider investing your return if you don’t have to settle back taxes. If you have back taxes to resolve, contact a tax resolution expert today. A tax relief professional can help you determine how to best use your refund to pay back taxes.

Consider Buying Insurance

Another way to use your tax refund is to consider buying certain types of insurance. With less than $1,000, you can purchase flood insurance if you live in a low to medium risk area. For less than $500, you can buy an umbrella liability policy with $1 million in coverage. That $1 million in coverage is beyond the limits of your car or homeowner’s insurance. Sometimes, it’s smart to think about the “what if” scenarios when considering how to manage your money. However, if you have to settle back taxes, you should do that first. Paying off back taxes is one of the smartest things you can do with your refund. If you aren’t sure how to pay off back taxes, call Platinum Tax Defenders today.

Start A Savings Account

So, you don’t have back tax debt or credit card debt, and you have a proper emergency fund. Now you can start saving for something fun! A vacation, perhaps? Keeping this savings account separate from your regular bank account makes planning for big purchases easier.

Home Repairs

For less than $1,000, you can make home improvements that may improve your daily quality of life. You might want to repaint one or more rooms or install new bathroom faucets. Perhaps you want to purchase a programmable thermostat, add new landscaping, or clean out your garage. Increasing the value of your home is a smart, long-term money management plan. However, remember that if you have tax debt to pay off, pay that first. Contact a tax resolution expert for advice on how to settle back taxes.

Make a Donation To a Charity

Receiving a tax refund can be the opportunity you were waiting for to donate to your favorite charity. If you don’t have back taxes to settle, consider donating. Be sure to save your receipts so you can write off the donation next year. An essential aspect of positive money management is sharing your wealth with those who are less fortunate. However, if you have back taxes to pay off, take care of those first. A tax attorney can help you better manage your refund by taking care of back tax debt.

Get Tax Advice From A Tax Relief Expert

If you get a tax refund this year, and you owe back taxes, pay those first. A tax resolution expert can help you determine the best plan to pay off back taxes. Hiring a tax relief specialist can also get you a better outcome when paying your back taxes. A tax attorney can help you determine which repayment method is right for you. Platinum Tax Defenders can also help you prepare for next year’s taxes. The IRS only wants to get what money you owe them in back taxes. Often, they are willing to help you settle back taxes, but you have to know how to try. When you don’t pay your income taxes, your back tax debt can add up. That’s where a tax relief services company can come in handy. It’s imperative that you work with a tax relief specialist who knows the IRS inside and out. When you hire a tax resolution professional, there are other methods you can use to avoid expensive back tax debt. Call Platinum Tax Defenders for a free consultation today.