What is a Tax Refund?
Generally, employees have income taxes withheld in each paycheck. If the money withheld during a year is more than the employee owes in taxes, they receive a tax refund. How often you receive a paycheck, salary and how your W-4 form is filled out can impact how much is withheld. Self-employed people often overpay their estimated quarterly taxes, which can result in a refund. If you’re curious about your W-4, consult with your employer.
How Do Tax Refunds Work?
These refunds will likely be issued a few weeks after a person’s taxes are filed but can take longer. The refund can be received by check in the mail to the taxpayer or directly deposited into their bank account. The IRS offers a “Check You Refund” tool, which allows you to monitor the status of your refund within 24 hours or 4 weeks of filing your taxes, depending on whether you e-file (faster method) or mail a paper tax return.
What to Do with Your Tax Return Money
Instead of going on a shopping spree, put your tax refund to work for you. Consider these five ways to use your tax refund and set yourself up for a brighter financial future.
- Save for your goals.
Visualize and track your financial milestones by opening and transferring your money into a Goal Savings account. Remember to set your personal financial goals before jumping feet first into saving. You can also open a low-risk, high-return certificate to help maximize your savings.
- Tackle your debt.
Are you juggling various types of debt or facing large bill payments? Use your refund to pay off or lower your debt. Avoid these five mistakes when repaying your debt and review your debt management options.
- Insure yourself.
A life insurance policy can help prepare you for the unthinkable. There is a policy for almost everyone regardless of age and health status. Gain a better understanding of life insurance by reading our blog post and reaching out to our team.
- Pay ahead on loans.
Usually, much of your home and auto loan payments go toward paying the interest and not the principal cost of your purchase. Additional loan payments can help you save money. For mortgage loans, such payments can help grow your home’s equity.
- Build your emergency fund.
Unexpected expenses can happen at any time and an emergency fund can be a safety net to help you cover them. Follow these seven steps to create an emergency fund that makes sense for your budget and savings goals.
Think about your financial future. The decision you make today could help to improve your finances in the long run. This tax season, get special savings on TurboTax® and H&R Block just for being a Members 1st FCU member. File the way you want and let TurboTax and H&R Block help you get your biggest refund possible.