Taxpayers are now opting to save their tax refunds, a significant change from the previous year wherein a lot of Americans were intending to use it to pay back loans.
According to a poll conducted by CreditCards.com, one-third of people who are expecting to receive tax refunds intend to put most if not all of the money into savings. And for a lot of people, this amount is the largest sum they will be receiving all year.
One-third prefer to set their refunds aside for savings
As of last year, 37.5 million households were given refunds with an average amount of $3,125. And while this might sound like a dream, it still has some implications.
Choosing how you pay your taxes for the year has its own upsides and downsides. If you withhold too much, you may get a refund later, but you bring home a smaller amount. However, on the flip side, you withhold too little, meaning you get to take home more of your pay, but you might end up owing a bigger amount later on.
About 90% of participants in a survey responded that they would prefer to have a large lump sum than to have it in portions throughout the year.
Based on a survey, the majority of those who will receive tax refunds prefer to get it in a lump sum.
You might have your own ways of dealing with taxes. But here are some tips to make sure you stay on top of your finances with regards to tax returns:
Take Another Look at Your Withholding
Whether or not you ended up with a huge refund or owed more than you anticipated, it's always best to review how much you are really withholding. You can take a look at your Form W-4 and see the taxes you have paid all through the year.
Review your withholding tax for the year.
Formulate a Plan for Your Refund
If you ended up getting a refund, you might want to set aside some of that for savings and loan repayments. You don't have to choose one over the other, you can do both at the same time if you plan accordingly.
Look Into Tax Saving Methods
Consider some tax-saving methods such as a retirement or health savings account, these are tax-advantaged accounts and a high-deductible health plan at the same time.
