Atlantic Blog

Listen, some of us are procrastinators, and I get it, but you don't want to put your taxes off until the last minute. The lucky of us make it through tax season without a single headache, and others find themselves deep in the throes of endless documents, begging tax officers to make it all make sense. Most of us have let out that sigh (if you know, you know) when we're done and the IRS has accepted our tax return, but what's the best thing to do if you're getting money back?

The gut instinct most people indulge in is to splurge on something frivolous, but there are better options that can help you get ahead.

But what if you haven’t filed your taxes yet? 

It's Time to Get your Tax Refund Direct Deposited 

I'm not here to knock on anyone who loves to gleefully check their mailbox every day in anticipation of receiving their tax refund and then getting crestfallen when it isn't there yet (okay, I might be a little), but it's way past time to embrace direct deposit. According to the IRS eight out of ten taxpayers get their returns directly deposited by the IRS (“Direct Deposit Fastest Way”).

If you're having the money sent to a single account, choose direct deposit in whatever tax program you use. Fill in your banking information—usually your account and routing number—and triple-check that everything is correct. The last thing you want to do is accidentally send your refund to someone else at the bank.

It's just that simple. 

RECOGNIZE SIGNS OF TAX FRAUD

Identity thieves count down the days to tax season all year round. Getting a tax refund can be exciting, but there are important signs of tax fraud that you should look out for! If you run into hurdles during the tax return process, you might have become a target of fraud.

• Denied Return – if your tax return gets rejected because they claim you already filed, that means someone probably stole your identity to submit a fraudulent return.
• Unrecognized Tax Documents – if you receive tax forms from companies you aren’t employed by or a client of, there’s a chance a fraudster used your information for a false return.
• IRS Communications - Receiving any unexpected communication from the IRS should raise instant suspicion. This could include a transcript or a letter regarding a tax return you did not file.

If you run into any of these issues, contact the IRS IMMEDIATELY.

So you got your tax return, but what should you do with it?

Eradicate Debt and Build Credit 

Is it as tantalizing as a new TV or splurging? No, obviously not, but you'll thank yourself later if you use your tax return to chip away at existing debt. Set money aside for future loan payments so you never miss a due date, evaporate credit card debt, or attack your student loans. 

Using your tax return to tackle your existing debt is not just a smart financial move; it's also a powerful tool for boosting your credit score. Remember, your credit score holds a significant influence on your life. Employers sometimes check your score before hiring you, landlords won't let tenants move in if their score is poor, and having a good score can help secure future loans at a lower interest rate. 

If your tax return isn't enough to help you reduce your debt, it might be time to consider a debt consolidation loan. Consolidating your debt can help boost your credit score, allow you to manage smaller monthly payments, and combine your debt into one convenient place. 

Grow Tax Refund, Grow!

Investing your tax return is a fantastic way to grow your wealth. Nowadays, a lot of people chase instant gratification when investing their money, but the best thing you can do is invest in something safe, like a high interest savings account. 

With a free Kasasa account, you can earn rewards on top of investing your tax return into your savings. Your tax return can grow throughout the year just by doing your regular banking. 

• Kasasa Saver allows you to earn 4.00% APY* on balances up to $1,000,000. 
• Kasasa Cash Checking allows you to earn up to 5.00% APY*on balances up to $15,000

Qualifying for your Kasasa Cash rewards automatically qualifies you for the highest Kasasa Saver® rate, too.

But maybe you want to use your tax return for some more immediate benefits.

Is it Time for a New Ride?

Unless you live in a city with fantastic public transport, chances are your life requires you to have a car. They can be expensive, depreciating assets, but they're also important to our day-to-day lives, so if you've been considering getting a new set of wheels - using your tax return can help make sure you're making a financially safe decision. 

So, if it's time for an upgrade, put it toward your down payment on a auto loan. 

• Your Down Payment Helps Reduce Your Monthly Payments and Interest - The more money you put toward a down payment for your car, the lower your monthly payments will become. 
• You Build Equity in Your Vehicle - New cars lose 20 to 25 percent of their value within the first year. Your down payment helps you build equity in your vehicle immediately, which is invaluable when the time comes to trade your car in.
• Helps You Stay Above Water - When you are "underwater" on your car loan, it means you have negative equity. In other words, you owe more on the vehicle than its current value. Your down payment can help you avoid this situation by reducing the effect of depreciation on your car's value.
• It's Easier to Get Approved for a Loan - A substantial down payment shows them you're serious about repaying your loan and makes lenders more likely to grant you approval for the loan.

We’re Here to Help!

Using your tax refund to improve your financial health might not be as exciting as a new gadget or a mini vacation, but the long-term benefits can be significant. Improve your credit score, grow your money, or invest in your future. You’ll be glad that you did!

For more information on ways to improve your credit score, securing a certificate, or other possible investments for your tax refund stop by any convenient branch locations or call 800-384-0432 to speak with a team member today.

Sources:

“Direct Deposit Fastest Way to Receive Federal Tax Refund.” Internal Revenue Service, 9 Jan. 2020

Each individual's financial situation is unique, and readers are encouraged to contact the Credit Union when seeking financial advice on the products and services discussed. This article is for educational purposes only; the authors assume no legal responsibility for the completeness or accuracy of the contents.