Every holiday season, you probably ask yourself why you spent so much on buying presents for family and friends, especially when you think of using your tax refund to pay of your Christmas bills.
Upon reviewing your credit card bills in late January for those December purchases, you probably also said to yourself, “I definitely won’t be spending that much again in 2017!”
This article will provide our point of view on using––or not using––your tax refund to pay your holiday bills.
Warning: The IRS Expects Taxpayer Refund Delays
One thing you should know is that for 2016 tax refunds, the IRS has already announced that some taxpayers will see delays in receiving their refunds at the beginning of the 2017 tax season.
That means that if you’re filing your Federal tax refund earlier in hopes of receiving a prompt refund, you may have to wait a while. With new tax laws in effect for 2016, any refunds that are tied to the Earned Income Tax Credit (EITC) and the Additional Child Tax Credit (ACTC) will be held until February 15th.
Because of other possible delays because of President’s Day holiday, that may push your refund back until around late February.
Avoid Tax Refund Loans
Many companies and some national accountant firms advertise that they can provide a “Tax Refund Loan,” which is basically an advance on what they estimate your tax refund will be.
But these loans typically come with hefty interest rates, which can sometimes be in the triple digits, plus equally high loan fees and add-on fees, which can quickly dilute your ultimate tax refund. So avoid these loans if at all possible.
Pay Off Your Holiday Bills Over a Few Months – What You Can Do
Instead of taking out an expensive tax refund loan while you wait for your refund, pay off your huge holiday credit card bills over the next few months.
You will incur some interest charges, but they’ll be way less costly than high-priced loans and higher-priced fees.
Cut Down on Other Monthly Expenses
Think of ways to curb your spending on items that you can live without.
For example, instead of spending $5 to $10 a day on coffee drinks, bring a thermos from your home to the office. Try brown bagging your lunch instead of dining out each day. Skip a manicure.
You’ll be surprised at how much you can save in a month or two.
Get a Part-Time Job
While some of our clients get part-time jobs during the holidays to earn extra money for their presents, why not consider getting a second job now to pay off the presents you bought?
Add to Your Withholding
Talk to your accountant about adjusting your withholding so that you break even at the end of the year and have more cash on hand every paycheck. You can start adjusting that now for your 2017 salary.
Save, Save, Save!
If you push some money into a savings account between now and the end of the year, you’ll have a sizable amount to pay off your holiday bills––and maybe take a holiday vacation. Start with $50 per paycheck which adds up to $1,000 over the next 10 months, while $100 per paycheck equals $2,000.
Do You Still Want to Use Your Tax Refund to Pay Off Your Christmas Bills?
With this information about potential delays in the IRS providing refunds, the alternative methods offered in this article should offer viable solutions.
Books in Balance San Rafael tax office is here to help you. To ask us a question or to make an appointment about using your tax refund to pay off your holiday bills, please contact us today.
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