Who Benefits from Tax Refund Checks?

As I checked with various members of my family, I noticed a pattern for those who file their own taxes and were getting refunds; we filed early.

Gotta pay? We filed last week, April 15th. I did both and used money from the Feds to pay my state taxes.

According to this report from Mediapost, here's what we are doing with our checks this year:

A Bird In The Hand

According to a new Bankrate.com poll by Princeton Survey Research Associates International, recession-weary taxpayers awaiting a tax refund check from Uncle Sam will not indulge in unbridled consumer spending this year. Instead, 84% of Americans receiving refunds intend to pay down debt, save or invest their windfall or use it for everyday necessities.

Plans For Refund
Plan	% of Respondents
Pay down debt	30%
Save of invest	28
Spend on necessities	26
Splurge on vacation or shopping spree	7
Something else/don't know	9
Source: Bankrate, April 2010

Bryan Pukoff, CPA and principal at Rehmann, says "... there is still a lot of uncertainty out there... different than what we have seen in the past... people generally... spend it on something for themselves... the percentages surprise me... "

On the other hand, 40% of those who believe they owe taxes say they are not prepared to pay up. Nevertheless, only 6% plan to borrow money, though 17% say they intend to set up an installment plan with the IRS. 63% of respondents will pay their taxes with funds straight from their bank accounts.

Tax Day Expectations
Expectation	% of Respondents
Expect to receive a tax refund	46%
Have to pay additional taxes	22
Don't expect a refund; don't have to pay	12
Already received refund	9
Don't know/no response	9
Source: Bankrate, April 2010

Greg McBride, Bankrate.com's senior financial analyst, points out that regardless of economic conditions, putting the money directly into an IRA would be a smart move from a financial planning point of view.

"... the Employee Benefit Research Institute showed that 54% of Americans have less than $25,000 saved for retirement. The tax refund is the biggest windfall people are going to get all year," McBride says.

The vast majority of Americans, 88%, will receive their refunds via check or direct deposit from the U.S. Treasury. 3% of respondents plan to have their refund deposited into multiple accounts, including an IRA. 3% of those getting a refund took a refund anticipation loan. For people with incomes under $30,000, that number jumps to 6%.

For additional information, please visit Bankrate here.

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