Tax Refunds Will Be Issued Despite the Shutdown (Best Ways to Spend it!)

According to a recent Forbes article, the IRS will be accepting tax returns and issuing refunds in the normal course of business, despite the government shutdown.  Referencing a 132-page contingency plan issued by the IRS, Forbes reports that:

  • Returns will be accepted.
  • Refunds will be paid.
  • The IRS website will be operational.
  • No live person assistance is available by phone or appointment.
  • No new audits.
  • Payments will be accepted.

(Read the full article here  https://www.forbes.com/sites/kellyphillipserb/2019/01/15/yes-to-refunds-no-to-audits-irs-advises-taxpayers-what-to-expect-during-the-shutdown/#1ecda2307710 )

So now that you can count on your refund this year, you have to decide how you will use it.  Here are some of the most popular ways that we Americans like to spend our refunds:

Vacation

You work hard all year, make it through the holidays and a cold, dark winter only to emerge in the Spring with cabin fever.  So a few thousand dollars showing up in your bank account in May is like pennies from heaven, providing the perfect excuse to kick back and relax for a few days.

Personally, I love to travel. New people, new places and new things to experience are exciting for me. If you’re not sure where you’d like to go on your next vacation, my favorite destinations (in order of preference) are (1) St. Eustatius, also known as “Statia” is located in the Dutch West Indies just a 20 minute plane ride from the more well-known island of St. Martin.  Less touristy (and less expensive) compared to the larger islands, you can take advantage of nature hikes up the Quill (volcano), botanical gardens, scuba and snorkeling or just plop on one of their idyllic black sand beaches. (2) Brigantine, NJ is for those less-adventurous travelers or folks with a tighter budget. Brigantine offers small-town charm only a 10-min drive from Atlantic City.   The beach is much quieter and more family-friendly, but you’re only a hop-skip-jump away from nightlife and excitement if you so desire.  Even during peak season I’ve managed to find weekly rentals for as low as $2,000 – off-season it’s even cheaper.  (3)  Cozumel, Mexico is a scuba-divers paradise.  With many resorts catering exclusively to divers and the near-century old marine park at your door-step there’s no shortage of things to keep you busy.  The town is a bit of a tourist-trap, but that only ensures that you’ll have plenty to keep you entertained when you’re not diving.  There’s plenty of shopping, restaurants and local attractions if you’re traveling with non-divers, too.

Savings/Down Payment

For many people, owning a home is quintessential to living the American Dream.  But even with FHA financing demanding only 3.5% down, the average NJ home requires a down payment somewhere in the neighborhood of $17,500.  For most families, it takes years to save up that kind of dough.  So if you receive an “average” refund every year (approximately $3,000) you can commit to a 5-year home buying plan with no problem.

To be honest though, if home ownership is your dream, I recommend ditching the interest-free savings plan the IRS offers and speaking with a financial consultant to get the best bang for your buck.   Not sure you get what I’m driving at?  Don’t worry, most people don’t…. read closely.  The tax refund you receive from the IRS is your money.  Your employer withheld these funds from every paycheck and paid it over to the IRS.  The IRS got to keep your money all year only to give it back to you without interest!  Even banks are paying 0.50% on savings accounts these days.  If you want to take better advantage of your money and keep more of in your pocket, start by speaking to a tax professional.  You may need to adjust your exemptions and withholding.  Ideally, you won’t owe the IRS and the IRS won’t owe you at the end of the year.  Then you’ll have more money in every paycheck to use how you’d like, including for saving and earning interest.

Pay Down Debt

For people who carry a balance on their credit card(s) all year, tax season is a popular time to pay off debt.  But before you take this route, you should ask yourself if this plan makes any sense at all.  If you have “average” debt and an “average” tax refund, you won’t be making much of a dent in your debt.

For example, you may have a $7,000 credit card bill and a $3,000 tax refund.  Great, you can reduce your debt to $4,000 in the blink of any eye.  Except the remaining balance continues to accrue interest (average APR is about 16%) and if you’d like to pay the rest of the balance this year, you’ll need to make monthly payments of at least $375 (and you’ll have to cut up that card so you aren’t tempted to use it again).

Even with the best of intentions, this is not reasonably likely to work out for most people.  By the time clients get to me, they’re usually drowning in upwards of $20,000 in debt and being charged 25-30% interest making the entire equation even more dreadful.  So unless you’re expecting a Trump sized tax refund this year, I can offer a better solution: BANKRUPTCY.

For only about half of the average tax refund, you can eliminate 100% of credit card debt in as little as 4 months with NO payments.   It doesn’t matter if you’re $7,000 or $70,000 in debt – and you can be current on your accounts or years behind.  It makes no difference.  Collections? Judgments? Wage garnishments? NO PROBLEM.  Chapter 7 offers eligible filers immediate relief in a quick and easy process without ever even seeing a Judge or the inside of a courtroom.

LAW OFFICE OF LEAH E. CAPECE, ESQ., LLC 

FREE BANKRUPTCY CONSULTATIONS – ELIGIBILITY DETERMINED IN MINUTES

Call: (908) 353-6700    Text: (908) 266-4843    E-Mail lcapece@leclawonline.com

Still unsure about Bankruptcy?  Read through many Frequently Asked Questions in one of my earlier posts:  https://leclawonline.wordpress.com/2018/06/14/bankruptcy-faqs/ 

Dispel all of your bad notions about Bankruptcy!  Read Bankruptcy Myths Debunked! in one of my earlier posts: https://leclawonline.wordpress.com/2018/12/18/bankruptcy-myths-debunked/

 

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