How To Maximize Your Tax Refund

Hopefully, you’re one of the millions of Americans who’ve received either their 2019 tax refunds or stimulus checks thanks to the CARES Act. If you’ve just gotten your newly minted funds and haven’t spent them yet, keep reading. Even in uncertain economic times, there are many wise things you can do with your surplus cash.

A Quick Note: If Haven’t Yet Filed Your Return

With the IRS extending 2020’s tax filing deadline to July 15, you still have a little more time to complete your return. You can do this easily through e-File, and you have plenty of both free and paid filing options. If you opt to file through U.S. mail, know that the IRS cautions a delay of several weeks in processing paper returns.

According to The Balance, you’ll need to gather a few important documents before you sit down to complete your return. You’ll have a Form W-2 for each job you worked in 2019, and you should also have completed a Form W-4 for any new jobs you started last year. You’ll also need 1099 Forms for any earnings not received from an employer:

• 1099-INT for interest income
• 1099-G for unemployment benefits
• 1099-DIV for dividends from stock
• 1099-MISC for independent contractor earnings
• 1099-R for withdrawals from pensions, retirement plans, annuities, or life insurance policies

Self-employed taxpayers will also need to complete a Form W-9 for each client paying them. Don’t forget about 1098, 1098-E and 1098-T forms for mortgage interest, student loan interest or tuition payments if you’re claiming deductions for them.

If you’re missing any of these forms, you’ll need to contact the organizations that issue them: educational institutions, banks, paying clients, and so forth. Having a lost W2 is probably the most inconvenient, but you can still obtain one through your employer. If that isn’t an option, you can contact the IRS directly and request a copy.

Build Up Your Nest Egg

NerdWallet, a popular finance advice website, stresses the importance of creating an emergency fund for your household. Most experts suggest socking away three to six months’ worth of income, ideally in a savings account. This can be difficult for many families, so NerdWallet recommends saving $500 as an initial first step. Fortunately, today’s online banking services make it incredibly easy to contribute to your savings. Automatic transfers after each payday should do the trick.

Pay Down Your High-Interest Debt

Mint, another great source for personal finance advice, mentions that paying down high-interest debt may be another worthwhile goal. With many credit cards charging 16% interest or more, reducing your outstanding balance can save you money in the long-term. For those fortunate souls without credit card debt, paying a little extra on an auto loan or another consumer debt may be another option. Check your loan agreement for any early payoff penalties before you fork over any dough.

Replace Old or Inefficient Appliances

It’s a major pain in the neck when a major household appliance breaks down. When you’re in a hurry to find another one, you may not get the best deals or choose an efficient model. Before you discover your washer dead in mid-cycle and half-full of water, spring for a replacement. ENERGY STAR rated products can potentially lower your household energy and water bills.

Learn Some New Skills

Recent events could shift the American economy for the long-term, so now may be a great time to learn a valuable new skill or pick up some additional job training. This can help you become a more attractive job candidate and provide you with some personal enrichment. Don’t forget to update your resume when you’ve completed training.

Receiving money is always a good thing, but putting it to good use is quite another. Allocate it for building your savings, reducing your debt, replacing old appliances and building new skills. Those are just a few suggestions, but they’re excellent starting points for making the most of your funds.