7 Better Ways To Use Your Tax Refund

Are you expecting a tax refund soon? If you’re like most Americans, you’re probably expecting somewhere around $3,000 to show up in your mailbox over the next months. Receiving a refund check has become a strangely normal piece of financial planning for Americans – we count on receiving that extra cash and plan to spend it.

But your refund check is just your own money going back into your pocket. I recommend you adjust your withholdings for the next tax year so you can have more money in your hands every month instead of lending it to the government interest-free all year. And if you are planning to receive a refund this year, here are 7 better ways to use it!

1. Save.

Did you know that 70% of Americans don’t have $1,000 saved? In fact, six out of 10 Americans couldn’t even access $500 in an emergency. And 34% of Americans said they don’t have any savings…at all.

Saving is not only critical to getting out of debt and building a stable financial future, but it’s also an essential part of stewardship. Saving does not represent a lack of faith, it reflects the heart of a faithful steward. Planning to care for your family, disciplining yourself to create financial margin, and balancing your savings are all opportunities to honor God and experience His blessings.

We recommend you make your first savings goal $1,000; then work your way to 3 months’ worth of your living expenses; then 6 months’, and finally 12 (you can track all these goals on Crown’s Money Map). If you’re working to reach any of these savings goals, commit to depositing your refund check directly into your savings account. According to a survey, 43% of Americans are planning to do so!

2. Pay Off Debt.

Barely second, 42% of Americans are planning to use their refund to pay off debt. As Proverbs says, the borrower is slave to the lender, so using your refund to pay off debt can help you break the chains of financial bondage and debt.

If you’re specifically dealing with credit card debt too large to be paid off by your refund check, I want you to get in touch with our partners at Christian Credit Counselors. They specialize in helping people pay off their overwhelming credit card debt and can walk you through the process of becoming debt-free.

We also have debt-help resources available for you to create an efficient payoff plan. Go through the 5 Steps to Debt-Free Living video course (it’s free) to get access.

3. Give.

Giving is a material expression of our spiritual obedience to Christ. It’s our way of acknowledging that God is the owner and provider of all we have and that we are His stewards. It’s described in the Bible as a practice that will bring overwhelming blessings and gifts to our lives. Yet we are out of practice and undisciplined when it comes to obeying the Scripture.

Jesus said, “It’s more blessed to give than to receive.” (Acts 20:35)

He also said, “Give, and it will be given to you. A good measure, pressed down, shaken together and running over, will be poured into your lap. For with the measure you use, it will be measured to you.” (Luke 6:38)

Giving requires an emotional sacrifice of forfeiting ownership. It propels us into a freedom found in exercising faith, by believing God will use our gift and supply our need. Be sacrificial and commit your refund check to your church or a reputable ministry that has impacted your life.

4. Build a Nest Egg.

Not saving enough for retirement soon enough is the number one regret of older Americans. As more and more people realize that their dreams of a Floridian retirement are decades of saving short, remember that you are saving to be used by God, not to live a life of leisure.

A detailed, disciplined retirement savings plan is important to have financial freedom. Research what kind of retirement account and investing strategy best suits your age, family, career, and future needs and then be disciplined to save. Adding your entire refund check to your nest egg will help ensure a stable financial future for you and your family so you will be free to be used by God.

5. Invest.

If you have at least 3-6 months of your living expenses saved, no debt, a habit of disciplined and generous giving, and a growing retirement account, then consider using your refund check to invest.

The Bible does not condemn investing and Christians should see it as an opportunity to increase their impact for the Kingdom. The stock market’s volatility this year has been in recent headlines, so be cautious and patient to do your research and seek wise counsel. With the right strategy and patient timing, a $3,000 refund check could yield you much greater returns later.

6. Prepay Your Mortgage.

Avoid wasting money on interest on your home’s principal by using your tax refund to prepay your mortgage. Throw a portion of or your entire refund check directly towards your principal balance on your house and shave months off of your loan! (Be sure to specify that you want to pay towards your principal when you make the deposit. Otherwise, a large portion could still go to interest payments.)

7. Spend to Save.

There are some things that you should spend money on to save money. For example, my wife and I are diligent about keeping our cars well-maintained and routinely spend money to rotate our tires, change our oil on time, and care for our vehicles.

Take care of your home, your vehicles, and your appliances by using your refund check to pay for updates and maintenance. It may not be an exciting use of your money, but it will pay off in the long run.

By Chuck Bentley, Crown Financial Ministries

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Cybercriminals File Fraudulent Tax Returns

It’s that time of year again – tax season. Hopefully, you’ll get a nice refund. As you work with your accountant or submit your return through do-it-yourself software, what happens if you learn that a return has already been filed under your name and your refund has been stolen?

Tax-return fraud has become such a significant problem that the government has coined a term for it: Stolen Identity Refund Fraud (SIRF), and the Internal Revenue Service (IRS) has a team of more than 3,000 people designated to handle fraudulent tax filings. According to an article published by LifeLock, employment or tax-related fraud accounts for 34% of the six types of identity theft. A recent article in Forbes indicates that cybercriminals are “ramping up their attempts to steal information through tax filings and preparers.” According to the Government Accountability Office (GAO), “The IRS estimated online robbers attempted to steal at least $12.2 billion, if not more, through identity theft tax refund fraud in 2016. IRS vigilance thwarted most of those attempts, but the fakers got away with at least $1.6 billion.” Cybercrime experts anticipate this type of crime will not only persist but expand.

Cybercriminals often pose as the IRS, a tax-filing agency, or other tax-related organization to steal personal information through phishing, which is an attempt to steal personal information through email, smishing (SMS/text phishing), vishing (voice phishing) phone calls, or fake mailings. Beware of any unexpected communications that request personal information such as your Social Security number, banking information, or other personal data.

This type of crime does not discriminate. While criminals target banking and other highly compensated professions, they also go after patients in hospitals and residents in nursing homes, victimizing the elderly, sick, and their grieving families when they are most vulnerable. They work early in the year before you have received the documents required to submit returns. By the time you realize that you’re a victim, the criminals have disappeared with your money.

It is always important to protect your personal information, but heightened diligence is critical during tax season. Learn to recognize the most common social engineering schemes and follow these helpful tips both at work and at home:

  1. Protect Personal and Financial Records: Do not carry your Social Security card in your wallet or purse and only provide the number if it is necessary. Secure personal information at home and protect personal computers with anti-spam and anti-virus software. Routinely change passwords for online accounts.
  2. Don’t Fall for Scams: Criminals often try to impersonate banks, credit card companies, and even the IRS hoping to steal personal data. Review all communications carefully. NOTE: The IRS will not call a taxpayer threatening a lawsuit, arrest, or demand immediate payment.
    1. If you receive an email claiming to be from the IRS that requests personal information, immediately forward it to phishing@irs.gov, then delete the message without clicking any links or responding.
    2. If you receive an email or telephone call claiming to be from the IRS, call the IRS directly at 800-829-1040 to confirm the legitimacy of the request, especially if the message is threatening or demands immediate payment.
  3. Report Tax-Related ID Theft: If you learn that someone has filed a tax return using your Social Security number, take the following actions:
    1. File a tax return by paper and pay any taxes owed.
    2. File an IRS Form 14039, Identity Theft Affidavit. Print the form and mail or fax it according to the instructions. Include it with the paper tax return and/or attach a police report describing the theft if available.
    3. File a report with the Federal Trade Commission using the FTC Complaint Assistant.
    4. Contact Social Security Administration and type in “identity theft” in the search box.
    5. Contact financial institutions to report the alleged identity theft.
    6. Contact one of the three credit bureaus so they can place a fraud alert or credit freeze on the affected account.
    7. Check with the applicable state tax agency to see if there are additional steps to take at the state level.
  4. IRS Letters. If the IRS identifies a suspicious tax return with a taxpayer’s stolen Social Security number, that taxpayer may receive a letter asking them to verify their identity by calling a special number or visiting an IRS Taxpayer Assistance Center.
  5. IP PIN. If a taxpayer is a confirmed ID theft victim, the IRS may issue them an IP PIN. The IP PIN is a unique six-digit number that the taxpayer uses to e-file their tax return. Each year, they will receive an IRS letter with a new IP PIN.
  6. Report Suspicious Activity. If you suspect or know of an individual or business that is committing tax fraud, visit IRS.gov and follow the instructions on How to Report Suspected Tax Fraud Activity.
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CFPB: Make a Plan to Save Some of Your Tax Refund

Making a plan to save at tax time

The start of the New Year means its tax season again. As you gather your tax records and prepare to file, why not use this annual responsibility to take another step towards building financial security for yourself or your family? For many Americans, a tax refund is the largest check they will receive all year. Saving all or part of that refund can help you prepare for unforeseen expenses throughout the year or perhaps reach a larger savings goal.

Research has shown that setting aside just $500 can cover a lot of the emergency expenses people often experience. Perhaps, though, you want to catch up on some bills, save for a major purchase, or even treat yourself to something special. Whatever you have in mind, tax time is a great opportunity to put money aside.

Here are some basic steps to take:

  1. Estimate your refund. Think about how much you might get back in a refund, based on what you received last year. Keep in mind, there were several changes to the tax laws in 2018. Find out how these changes could impact your refund this year.
  2. Identify and prioritize your bills. This includes essentials like rent and utilities, as well as bills you would like to pay off or pay down. If you need help, the Bureau has several helpful worksheets to track your spending and get a handle on your debt. Contact your CCC Account Specialist to put your refund toward your Debt Management Program.
  3. Plan for special purchases. Consider if there are any larger purchases you would like to make with part of your refund.
  4. Calculate what remains. Add up your expenses, payments, and purchases to see what you might have left over from your refund.
  5. Make a plan to save. Set a goal to save a portion of what’s left over from your refund. Perhaps it’s $500 or 25% of your refund. Whatever you choose is OK — just make a plan so you have a savings goal. Use our tax time worksheet to help you design your plan.
  6. Finally, decide where you want to put your savings. Do you have a separate account or another way to set money aside? Or perhaps you have a prepaid card with a set-aside feature. If you have an account or a card you want to use for saving, make sure to have both your account and routing numbers available when you file your return. Rather than waiting for a check, the IRS can often directly deposit your refund into this account.

Getting ready to file

Depending on your situation, there may be a number of free or low-cost options for filing your tax return. It’s important to choose a reputable tax preparer that will file an accurate return. Any mistakes could result in additional costs and complications in the future.

You can generally get free tax preparation assistance by IRS-certified volunteers at a Volunteer Income Tax Assistance (VITA) or a Tax Counseling for the Elderly (TCE) location if:

  • Your income is $54,000 or less
  • You are 60 years old or older
  • You have a disability or speak limited English

The IRS locator tool will help you find a VITA site near you.

If you are not eligible to file at a VITA site or if there is not a VITA site nearby, there are also other free resources available for filing your tax return. Here are some options:

  • If your income is $64,000 or less, you can use a major tax-preparation software product, offered through the IRS Free File Alliance, to prepare and file your return for free.
  • If your income is more than $64,000, you can still download free tax filing forms through the IRS.
  • If you’re a member of the military or a military dependent, you can get free tax help from the military VITA program. On or off base, VITA programs are easy to find — even overseas.

Other things to consider at tax time

  1. Protect your tax data from being stolen. The IRS provides a number of simple steps you can take to protect your data.
  2. Be aware of tax scams. The IRS provides some helpful information on what to watch out for and how the IRS will communicate with you if they have questions about your return.
  3. Know your rights if you live in an area affected by disaster. In some disaster situations, the IRS provides relief from tax filing requirements. Find out whether you qualify.

Putting it all together

Planning ahead can help you to take advantage of tax time to make the most of your tax refund. Take some simple steps to make a savings plan. If you are eligible, save on filing fees by using one of the free or low-cost filing options. Finally, make sure you protect your tax information so that you can feel confident that your return is filed properly and you get the refund you have earned.

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