3 Useful Tips for Your Tax Refund

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It’s officially tax season, which means you have one important thing on your mind: your upcoming tax refund. Before you collect your documents and start filing your taxes, you should read these tips regarding your tax refunds. 

1. File Online

Some Americans still file their taxes the old-fashioned way. They fill out paper forms and then mail them to the IRS location closest to them. Should you follow suit?

No. If you have a habit of filling out your tax returns and mailing them, you should stop. Start filing your returns online instead. 

Why? Electronic files are much easier to process than paper ones. Mailed paper returns can take six months or longer to process. In comparison, electronic returns can be processed in a much shorter timespan. As long as you’ve filed everything correctly, your returns should be completely processed within 21 days of filing online. 

Filing your taxes online will also make it easier to get updates about the state of your refund. You can use the IRS’s Where’s My Refund? feature to give you an ETA of your refund within 24 hours of filing online. If you mailed in paper returns, it could take you six months or longer to be able to access this online tracker.

2. Choose Direct Deposit

Filing online isn’t the only thing that can speed up your access to your tax refund. You can also speed up its arrival by choosing direct deposit over a mailed check. Choosing direct deposit will allow the IRS to electronically transfer your refund into your checking or savings account. 

When you choose to have your refund mailed by check, it could add another week to your wait time. Skipping this step and using direct deposit could reduce that wait from 3 weeks to 2 weeks. 

3. Put Your Refund to Good Use

You might feel excited to get this windfall sent directly to you, but you shouldn’t use it for any old expense. It will be tempting to spend on non-essentials like a night out on the town, but there is a much better strategy for your tax refund: add it to your savings.

What savings? It all depends on your current needs. For instance, do you have an emergency fund? If the answer is “no,” you should aspire to change that as soon as possible. Without an emergency fund, you might not be able to handle an urgent expense that’s outside of your budget — even if it’s fairly small. 

If you don’t have any emergency savings stashed away, you might not be sure how you can cover these urgent expenses. You’d have to look to alternatives like personal loans to manage them. As long as you met all of the eligibility requirements, you could apply over the phone for a loan in hopes of using the borrowed funds to handle the expense. If you were approved, you could use the money to pay off your emergency and resolve the problem. Then, you could follow the loan’s repayment plan.

Again, it would be much easier to handle unexpected expenses with savings. This is why you need an emergency fund. 

What if you have an emergency fund? Then, you could add this windfall to your kid’s college savings, your home improvement savings, your retirement savings or even your summer vacation savings. Use this money to help yourself in the future. 

It’s important to know these tips before you file your taxes this year. They will help you get the most out of your refund.

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