Now that your taxes are done (they ARE done, right?), you may be one of the 83% of federal filers who are expecting a tax refund from the IRS, or one of the tens of thousands of filers waiting on a one from the state of Wisconsin.
If so, we have some answers to some questions that we suppose you might have about your eagerly-anticipated check(s).
1. Where’s my money?
Of course, the earlier you file your taxes, the sooner you will get an expected refund. Assuming everything is in order, the IRS says you should get your electronically-deposited refund within a couple of weeks of filing, and any paper checks will be mailed about two to four weeks after your return is received.
To find the status of your federal income tax refund, go to irs.gov/refunds. You will need to have your Social Security or Taxpayer ID number handy, along with your filing status and the exact amount of a refund you are anticipating.
Wisconsin taxpayers expecting a refund can check on their money at tinyurl.com/witaxref. Again, you will need to enter your Social Security number and the amount of refund you’re expecting.
Keep in mind that due to an increase in taxpayer identity theft, refunds may be delayed because the state and feds may be reviewing your return to ensure you are actually entitled to your refund.
2. What should I do with the refund?
The IRS says the average federal income tax refund this year will be about $3,100, a significant amount of money to the majority of Americans.
According to a survey conducted by the Nielsen company for H & R Block, the vast majority of taxpayers put their refund in savings (46%), pay bills (37%), and pay off debt (31%).
If you’re of a like mind, start by paying any urgent bills (such as your utility, rent, or mortgage payment). If those are already covered, then look to retire any high-interest debt—credit cards or student loans certainly count, especially if the interest rate is more than, say, 6%.
If you’re a working taxpayer and could contribute more to an at-work retirement plan (like a 401k or 403b), bump up your paycheck contribution percentage for a while, and use the refund to offset the diminished amount. Once you use it up, you can always revert to your current contribution level.
You can also use your refund to make a 2016 contribution right now to an IRA or Roth IRA, assuming you qualify. The IRA contribution will cut what you owe on this years’ taxes by anywhere from about ten to forty cents for every dollar contributed, depending on your tax bracket.
And if all of those other pressing concerns aren’t a worry, then you may want to use your refund in some ways cited by respondents to the aforementioned survey: splurge on something for yourself (17%), or on family and friends (11%).
3. Should I get a refund?
As much as you might enjoy getting a refund, you might be thinking that you would prefer to pay in more money when you file your taxes, rather than having less on hand during the year.
If so, look to reduce your withholding. If you’re a worker, find out how to calculate the proper amount at tinyrul.com/irswhcalc.
Retirees can have a smaller amount withheld from their pension and Social Security payments, as well as the taxes taken on distributions from IRAs and other tax-deferred retirement accounts.
But make sure you keep enough of that spare cash on hand so that you can pay any taxes due by the time you file your income taxes.
And if the difference between what is withheld during the year and what you actually owe is too large, you may end up having to file quarterly estimated tax payments, along with incurring a possible penalty.
In light of those potential consequences, you’ll probably agree that it’s more fun to get a refund.