In the middle of April, every year, the federal tax return filing season ends. For many American taxpayers, that would mean what seems to be endless forms, pay stubs and a lot of paper works. However, this would be also a great opportunity for you to save up for your future. You can maximize your tax time in three easy ways and have your tax refund work for you.
The first way is to put your refund into a savings account. This will fit for taxpayers claiming some of the unique tax credit that benefit the hardworking families all over the country such as the Earned Income Tax Credit and the Child Tax Credit. These two tax credits may have the largest sum of tax refund money that they will see the entire year. You can open a saving account and deposit a portion or all of your refund and let it grow over time. You can do it by filling out the Form 8888, which will divide your refund even over to multiple accounts.
The second way is to put your refund into a savings bond. You can instruct the IRS to directly deposit your refund into more than one bank account by filling out Form 8888. You can also buy up to $5,000 in US Series I Saving Bonds. The IRS has an expanded Form 8888 to allow those taxpayers who want to use all part of their refund to buy the bonds. Saving bonds can be purchased $50 increments up to its maximum of $5,000. If there are some remaining tax refund, you can choose whether to have it delivered by check or by direct deposit. The paper Savings Bonds will be delivered by mail to your address listed on your latest tax return.
You can use your refund to buy Savings Bonds for yourself or others, including your children and even your grandchildren. I Bonds will be purchased through face value. If you pay $50 using your refund, then you will get $50 as Savings Bonds. While that savings bond is under your name, it will earn interest and provide protection from future inflation. Even though Savings Bonds are not marketable, in the sense that they could not be sold or bought in a secondary securities market, they can be redeemed for principal and accrued earnings at any time after one year.
Savings Bonds is considered as a long term investment. If ever you will redeem it within the first years, then the three most recent months' interest will be most likely forfeited. But, after five years, there will be no penalty that will apply. You can visit the IRS website if you want to know some further details in purchasing Savings Bonds with your refund.
The last way to maximize tax time is to get your taxes prepared for free. This will fit taxpayers who earn less than $53,000 a year, then you can have your taxes prepared by IRS-certified volunteers in your respective local community at no cost at all. The Volunteer Income Tax Assistance (VITA) program has served millions of American taxpayers for more than 45 years. If you qualify for this one, you can find your local VITA program using a tool that they will provide. Through this site, you can find expert information to help you with the tax code and also prepare your taxes.
There are a lot of smart and practical ways to use your refund. One of them is to invest in a retirement plan. Plan and enhance your future now by using your refund to invest in a tax-deferred retirement plan for you. If you have an Individual Retirement Account (IRA), you can choose whether to make a one-time sizable contribution or save your tax refund for smaller investments over several months.
If you are a homeowner that has quite hefty monthly mortgage monthly payment, then it is now time for you to give yourself space to breathe by using your tax refund to pay ahead of your deadline. While for non-homeowners, you can contribute it to your car loan, student loan, or even prepay your insurance premium.
Always take good care of your belongings especially your car and your home. Spend your tax refund even if it's costly, but as long as it is necessary repairs to your vehicle and home. If you have some leaky roofs, replace it. If your tire is quite old and not performing well anymore, then buy a new one.
If you are not confident on what to do or what is the safest path to consider, then you may consider consulting an Accountant so you can save money and so that you will be confident about your finances. Everything starts with you, committing yourself to save. An Accountant would be a great help in keeping you motivated with information, advice, tips, and reminders to reach your goal.
Flynn Financial Group Inc