Since you've likely already filed your taxes or will be soon with an extension, your reward hopefully will come in the form of a refund. But those lucky enough to receive one of these windfalls must make that a once-a-year decision: what to do with it?
It’s a good situation to be in, and there are many different options. Senior Tax Attorney Jonathan Bochese with the Tax Defense Network offers the following advice for using your tax refund:
· Pay off debts, especially those with high interest rates. The best use for any tax refund is to use it to pay off high interest revolving debts. Doing so will help minimize the extra amount you pay in interest, which can add up significantly.
· Put it in savings. Everyone should have an emergency fund. If you are lucky or financially savvy enough not to have credit cards or other interest bearing revolving accounts, then determining what to do with a large tax refunds depends on your individual situation. The general rule is that everyone should have an emergency fund totaling six months of your take home pay set aside in a savings account.
· Consider investing it. If you are a saver and are already prepared with an emergency account, consider investing the refund in your brokerage account or purchasing long-term safe stocks that pay dividends. Doing so will ensure a continuous return on your money, but also comes with investing risks that should be considered via consultation with a certified professional. Of course, contributing to safer long-term investments like a Roth IRA is always an option as well.
· Or just spend it, and call it a day.
The Tax Defense Network provides financial advice and tax resolution services around the country. The Tax Defense Network’s team of licensed tax professionals, enrolled agents, and CPAs has resolved over $120 million in tax debt. The Tax Defense Network is A+ rated by the Better Business Bureau. Learn more about the Tax Defense Network at www.facebook.com/taxdefensenetwork or www.twitter.com/taxdefense.
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