IRS gives taxpayers more time to file taxes
The IRS is delaying the April 15 tax deadline to May 17. FOX Business’ Jackie DeAngelis with more.
Many Americans rely on their tax refund each year – and this year could be even more important than normal considering the ongoing economic effects of the coronavirus pandemic.
But not all causes are created equal when it comes to deciding what to spend it on – or whether to spend it at all.
“It can be tempting to spend this money splurging on something fun, but investing in healthy financial habits is a better way to use this cash,” Anne Marie Ferdinando, member outreach manager from Navy Federal Credit Union, told FOX Business.
And spending the money wisely may be essential for households that are still reeling – or trying to recover – from the devastating economic effects of the coronavirus pandemic.
IRS CLEARS UP FEWER TAX FILINGS, LOWER REFUNDS
One prudent way Ferdinando said individuals can spend their refunds is on their debts.
“This might seem straightforward, but credit card and loan payments can strain your budget, worsen your credit score, and negatively impact any short- or long- term financial goals you might have,” Ferdinando said. “Using your refund to pay down or pay off debt will help lighten the load.”
Ferdinando noted that those who receive a third stimulus check may have a unique opportunity to make serious progress on paying down those debts.
The second way Ferdinando believes individuals should consider spending their refunds is to start – or build up – an emergency fund. This will help provide a financial cushion in the event of unforeseen challenges and financial hardship.
And lastly, Ferdinando said people can contribute to their retirement savings. Some people may not typically consider putting their refund cash toward their savings accounts, but it could actually be a great way to consistently build up savings.
“Your tax refund presents a perfect opportunity to pad your retirement savings and invest in yourself,” Ferdinando said. “Oftentimes it can be difficult to think far into the future and feel tricky to find ways to contribute to your retirement savings, but this is a foolproof way to make a difference year after year.”
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According to data from the IRS, the average tax refund this year is about $2,967.
Nine out of 10 taxpayers will receive their refund within 21 days when they file electronically with direct deposit if there are no issues with their tax return, the IRS said. Many people who file this way can expect to see the money even sooner than three weeks.
It will take longer for people who are waiting for mailed checks, with some estimates ranging to as many as eight weeks.
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Don’t forget the tax agency postponed the filing date until May 17, from April 15. That applies to federal income tax returns; each state has its own separate rules regarding state income tax returns.
Meanwhile, additional help is also on the way in the form of another round of stimulus payments. The $1,400 checks began to hit some recipients’ bank accounts last week, and the government said on Monday that the next batch of payments would be issued this week, including many that would arrive by paper check or prepaid debit card.
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