Tax Season and Your Refund Options
Here are a few tips to ensure that your refund arrives as quickly and safely as possible as well as some ideas on how to get the most out of your money when it does.
The Refund Process
Once you have submitted your federal taxes and know you have a refund coming to you, the fastest way to get your tax refund is to have it electronically deposited into your financial account through the IRS’s Direct Deposit Program. It’s free to consumers, and it allows you to deposit your refund into as many as three separate accounts. While you can still receive your refund in the form of a paper check, there are several advantages to direct deposit. Not only is it faster, but direct deposit is also more secure. Another option is to have your refund deposited onto a prepaid card.
Protect Your Money from Tax Scams
The IRS typically does not initiate emails to individuals asking for personal information. Be wary of phone calls and emails from anyone claiming to be from the IRS. Identity thieves have been known to pose as IRS agents, providing a fake name and IRS badge number and even creating a fake phone number that appears on caller ID as coming from the IRS.
Some people use tax preparers to assist them with preparing their tax returns. While most are recognized professionals who can be very helpful, some are scammers. Be wary of those who advertise with promises of large refunds or special inside knowledge of little-known tax credits and rebates or those volunteering to come to your home. They make money stealing your personal information for later use and collecting fees. If you aren’t sure, ask for the tax preparer’s PTIN, which is the IRS tax preparer identification number that all legitimate preparers have.
What to Do With Your Refund
Once you have received your refund, you need to decide what to do with it. Many people use tax refunds to make large purchases they might not have the cash for at other times of the year. It can also provide a great opportunity to start a new savings option, contribute to your emergency fund, or reduce outstanding debt, such as making an extra mortgage payment.
- The IRS allows you to divide your federal tax refund into two or three additional financial accounts. By splitting your refund, you have a convenient option for managing your money – sending some of your refund to an account for immediate use and setting some aside for savings.
- You may also want to consider using your refund to start or augment emergency savings. Having emergency savings provides peace of mind when something unexpected occurs, such as a major car or home repair.
- If you are carrying a credit card balance, think about using your tax refund to pay it down or even pay it off. To get the most from your money, it may make sense to pay off a credit card with a high interest rate, compounding against you month after month.
If you are getting a tax refund this year, remember to take steps to keep your refund safe, know the refund options available to you, and consider different ways to make your money work harder for you.