Using your Tax Return WiselyAs you organize your documents in preparation for tax day, you may be dreaming about spending your tax refund on a trip, a new TV or a new computer. Although it may be tempting, using your refund wisely and practicing some good-sense tips will help you get closer to your financial goals and a fit financial future. “The first step before using your tax refund should be to make a list of priorities,” said Joe Herndon, GreenPath group manager and financial counselor. “If you have a significant other, you should make separate lists and then combine them into one, making sure you agree on the ranking of those priorities.” Discuss with your partner how these priorities relate to your current financial situation. “If you are struggling with your home budget and have been unable to save any emergency funds, it would be wise to put some of the money into savings and use the rest to pay off debt,” Herndon remarked. Here are some additional ways to use your refund wisely:
If you’re disappointed with the advice because you really wanted to treat yourself or your family to something special, don’t despair, compromise! Consider spending 80 percent of the refund wisely and splurging with the remaining 20 percent. Turn a week-long vacation idea into a nice long weekend away, a fantastic night on the town, or a day at the spa. Also consider putting it toward a membership that your family can use for the upcoming year, such as a zoo or athletic club membership. You’ll feel good knowing you made a great financial decision, while still being able to enjoy yourself. Although it is nice to receive a large refund, it really means that you overpaid the government through the taxes withheld from your paycheck. You may want to consider changing the number of exemptions on your W-4 Employee’s Withholding Allowance Form. Making this change will add a little bit extra to your paycheck each month. But make sure to use this money wisely, rather than spend it frivolously. Putting it toward debt, building your emergency fund or contributing more to your retirement will positively contribute to your financial future.
Know the Facts about the Earned Income Tax Credit
GreenPath recognizes that many people today are experiencing financial difficulties. The Earned Income Tax Credit (or EITC) is a tax credit you may wish to consider to help reduce your taxes while increasing your chance of receiving a refund.
What is the Earned Income Tax Credit?
The EITC is a tax credit for working individuals and families who make less than $48,000 a year, depending on filing status and the number of qualifying children in the household. Depending on income, the EITC can offer a refund of up to $5,657.
Why is the EITC important?
Each year, families substantially increase their annual income by utilizing the EITC. In fact, the EITC lifts more families out of poverty than any other federal aid program. It plays a crucial role in helping families get on the right financial footing.
How can I use the EITC?
There are countless ways to use your EITC, but here are a few that will help you become financially stable:
Who can get the EITC?
How do I get this tax credit?
File taxes with FREE professional assistance: Free tax preparation assistance may be available at locations throughout your region. Call the IRS at 1-800-906-9887.
File taxes on your own, via paper return: Complete the Schedule EIC in the Federal 1040 or 1040A return.
File taxes on your own, via online return: The Free File program provides free federal income tax preparation and electronic filing for eligible taxpayers through the IRS. To get started, visit http://www.irs.gov/efile/article/0,,id=118986,00.html?portlet=7.
For more information on the EITC, visit http://www.eitc.irs.gov/central/main/.
2009 Tax Law Changes Provide Saving Opportunities
According to IRS.gov, in 2009 there are numerous new and expanded deductions and credits for a broad cross-section of taxpayers. Following is a summary of a few key changes you will find as you prepare your federal income tax returns.
For more details about these and other tax law changes, visit www.irs.gov.
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