Tax returns | blog.firstffcu.com

Did you recently receive your tax refund, but don’t know what to do with the extra money? While there are many options for spending your tax return, some may be better than others based on your circumstances. Sure, you might be tempted to use it on a shopping spree or extravagant vacation, but spending the money strategically will be more beneficial in the long run. Here are some useful ways to spend your tax refund that you might not have thought of.

Put it into your savings

No matter what your financial and personal goals are, having a savings account* is essential. If you’re already transferring a certain amount of money per paycheck to your savings, adding in your full tax refund can provide an extra boost to what you’ve already built. However, if you don’t already have a savings account, you can always use your tax return as a reason to start saving and investing in your future goals.

Start an emergency fund

Anything can happen and having an emergency fund can be a lifesaver when the unexpected occurs. Whether it’s an expensive vet bill, hospital stay, or a car repair – emergencies add up. The only way to truly be prepared is by saving money. And while you may already have savings, a separate emergency fund can prevent you from having to take from a different account meant for another expense.

Pay off your debt

Don’t let debt loom over you. Use your tax refund to pay down the money owed on your credit card or student loans. Paying off a large chunk of debt at once, can help lower your monthly credit card payment while also paying it down faster. While your full refund may not be enough to pay back everything, you can use it as an opportunity to start building a realistic repayment plan that works within your budget.

Make home improvements

Living in a home means there is usually maintenance, various fixes, and lots of upgrades to budget for. On the plus side, keeping up with these improvements can help lower energy bills and increase the value of your home over time. Replacing old windows, for example – can improve the efficiency of your air conditioning, thus reducing your electric bill during the hot summer months. Remodeling your kitchen or bathroom with new plumbing, appliances, or decor can help potentially also increase the value of your home and make it look more appealing when you’re ready to sell. While these projects can get pricey, using your tax refund – combined with a home improvement loan from us, can help make funding your project more realistic.**

Start your dream business

Maybe you’ve been dreaming of honing your artistic abilities by starting a photography business. Or perhaps you’re hoping to use your love of woodworking to begin crafting and selling furniture. Either way, your tax refund can provide a bit of capital to help get you started. While you don’t have to quit your current job to start profiting off your side business, it’s always recommended you speak with a financial expert (like us!) who can help advise you on which loan products and account offerings you’ll need to kick off your dreams.

Put it back into your community

Is there a cause or charity you’ve been wanting to support? Rather than donating money from your checking account without a plan, use what you’ve received from your tax return. Not only does your charitable donation benefit those in need, but it may also pose potential donation deductions for next year’s taxes. Not to mention it’s a financial decision you can feel good about!

Whether you need financial advice, or you’re looking to open a savings account, or get a loan – we are here to help. Stop in your local branch to speak with a representative today!

*A $5 deposit in a base savings account is required for credit union membership before opening any other account/loan. All personal memberships are part of the Rewards First program and a $5 per month non-participation fee is charged to the base savings account for memberships not meeting the minimum requirements of the program. Click here to view full Rewards First program details. Some restrictions apply, contact the Credit Union for more information.

**Available on primary residence only. A First Financial membership is required to obtain a Home Improvement Loan and is open to anyone who lives, works, worships, volunteers, or attends school in Monmouth of Ocean Counties. See credit union for details. Rate will vary based off of applicant’s credit rating. Not all applicants who apply will be approved, subject to underwriting guidelines and credit approval. Lien position and appraisal valuation may affect the maximum loan amount. Not all applicants will qualify for maximum Loan to Value (LTV) ratio. It will be based off of creditworthiness, property type, occupancy, lien position, and loan amount. Rates will be affected by LTV or combined LTV if there is another lien on the property. Loan amounts over $7,500.00 will be required to give First Financial FCU a security interest in their property. Rates will vary based off of lien position and whether the loan is mortgage secured or unsecured. For mortgage secured Home Improvement loans First Financial FCU (FFFCU) will waive closing costs at inception of loan. If loan is terminated within the first 2 years of opening, closing cost waiver is revoked and are required to be paid back by member to FFFCU.

From math errors to missing Social Security Numbers to forms that aren’t signed, there are plenty of common tax mistakes that taxpayers can make when filing their returns. These mistakes can lead to delays in processing returns and issuing refunds. If serious enough, they might even lead to an IRS audit. Fortunately though, the IRS does allow do-overs. You can usually file an amended return if you realize that you’ve made a mistake. But that’s the problem — you might not realize you’ve made a mistake. Brush up on the following tax fails before you file, so you can avoid making the same errors this tax season.

Waiting Until the Last Minute to File

Although plenty of people put off doing their taxes, waiting until the last minute to file a tax return can backfire. Do you really want to be scrambling to make the tax filing deadline (April 15^th)? In a rush to file, you may forget to actually pay your taxes if you owe – which can result in a late payment penalty from the IRS (0.5% of taxes owed each month the payment is late). File as early as possible and avoid this headache altogether.

Forgetting to Pay Taxes on a Cashed-Out IRA

Did you cash out IRA money last year or plan to roll one over and then never did? If you forget to do this, the amount that has been cashed out is taxable. You also need to report any IRA changes on your tax return. If you forget to do this, it could result in a tax audit. And once that happens, everything will be checked with a fine tooth comb. The moral of the story: don’t forget to report any retirement account changes you made in the last year.

Mailing the Tax Check to the Wrong Agency

If you owe taxes or have a situation in which you have to pay taxes on an employee during the year (you hired a nanny to watch your children and are paying taxes on the nanny’s wages), be sure your payment is going to the right place. Failure to do this can again result in late fees and a giant headache. The same goes for electronic payments. Double check the mailing address and then check again.

Not Knowing the Filing Deadline for Businesses

Are you an S corporation? Typically, an S corporation business must file a return by the 15th day of the third month — not the fourth month, according to the IRS. Failure to file by the correct deadline could result in a file penalty fine of $450.

Not Making Estimated Tax Payments

Because self-employed workers don’t have employers to withhold taxes from their paycheck for them, they have to make estimated tax payments to the IRS throughout the year. A good habit to get into here if this pertains to you, is to set aside money each month and try to estimate as accurately as you can – should you owe more on taxes when you file.

Forgetting to Make Tax Payments

This is a pretty straightforward one – don’t forget to make your tax payments if you owe this year. And if you are self-employed, don’t forget to send in your estimated tax payments. If you are required to send in estimated tax payments and you forget, you could receive an underpayment penalty fee.

Trying to DIY Tricky Tax Returns

If your tax situation is simple enough to file the 1040 form, you don’t need to hire a professional to prepare your return. But if you don’t have a simple tax situation and have multiple sources of income, own a home (or two), have investments, a military pension, etc. – it might be a good idea to let a professional handle filing your return for you. A tax accountant can help you identify expenses you hadn’t previously been claiming as deductions, which can ultimately lower your tax bill. They’ll also look at your withholding with you, and see if it can be adjusted if you always seem to owe the IRS money come tax time each year. Sure – you’re going to have to pay for this service, but if you have a complicated tax return it will probably end up saving you money (and aggravation) in the long run.

More sound advice: it’s best to prepare for tax season all throughout the year. As you collect receipts, paperwork, statements, and so forth during the year – put them in a file and take them out and go over them right at the start of each new year. This way you stay on top of any changes that come up throughout the year, and aren’t digging for items at the last minute. Be prepared and organized, and filing your taxes each year will become second nature.