ON THE MONEY: Wise ways to spend your tax refund | Features

The average federal income tax refund in 2021 was greater than $3,039. The question for many of us becomes how best to spend that money? In the past few years with all of the turmoil in the economy, more and more Americans are actually making well-considered decisions about spending their refunds. According to a recent survey conducted by bankrate.com, about one-third of the respondents indicated that they would use that refund to pay down debt, while another third stated that they plan to invest the money.

About a quarter of the surveyed people say they spend the extra cash on necessities such as food and utility bills, and the rest will spend the money on something else, or they simply do not know what they will do with the funds.

Interestingly, 40% of us would prefer to receive a large tax refund, while 46% either would opt for a small refund or no refund at all. As I have written in the past ad nauseam, I believe that it makes no sense whatsoever to loan money to the Treasury at zero interest, but the numbers indicate that a goodly number of us favor the “forced savings” aspect that over withholding provides. If you want to reduce the amount of your money that you, in effect, loan to the Treasury Department, there is a withholding calculator on the IRS website that can help you to ensure that the withholding that you have in place with your employer is just enough to cover your 2016 tax liability. To access the calculator, visit www.irs.gov/Individuals/IRS-Withholding-Calculator.

If you usually make estimated tax payments each quarter, the calculation is a little more involved. Typically, if you used tax preparation software to prepare your 2015 return, you may use the Estimated Tax feature of that software to determine the magnitude of each quarterly payment. If not, you can visit turbotax.intuit.com and divide your forecasted taxes for the coming year by 4…

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