The nation’s taxpayers will receive an estimated $230 billion in federal
tax refunds this year, fueling the U.S. economy and delivering a
significant financial windfall to the average American household. And
approximately $140 billion will be in consumers’ pockets by Feb. 15,
according to the American
Tax & Financial Center at TurboTax.
Refunds are especially vital for the estimated 40 percent of U.S.
households living paycheck-to-paycheck. In 2012, the average tax
refund was $2,700, equaling more than a month’s worth of income for
two-thirds of taxpayers or more than three months of groceries for the
average family of four.
“A federal tax refund is the most important financial moment of the year
for many families,” said Bernie McKay, director of the American Tax &
Financial Center at TurboTax. “Low-income households use tax withholding
and the subsequent refund almost like a savings fund, using the money to
pay down debt or to cover everyday living expenses.”
Refunds are the primary reason taxpayers file tax returns by
mid-February. According to research by TurboTax®,
the nation’s leading tax
preparation software from Intuit Inc. (Nasdaq: INTU), approximately
84 percent of taxpayers filing in Jan. through Feb. 15 receive a refund,
compared to only half of those who file in April.
Holiday Spending Hangover
Tax refunds take on even greater significance in the face of holiday
spending and credit card debt. In 2012, Americans planned to spend an
average of $854 during the holidays, adding to the average consumer
credit card debt of $8,721. Consumers typically make the largest dent in
their credit card debt in the first quarter of the calendar year, fueled
by the increase in income due to tax refunds. The average tax refund
could cut almost one-third of the average credit card debt.
How taxpayers plan to use their tax refund
According to TurboTax, 42
percent of early
tax filers plan to use their refund to pay down debt and cover the
costs of rent, food and utilities . Another 25 percent will save at
least some of their tax refund.
“Taxpayers can use a portion of their refund to pay down debt as a smart
first step to taking control of their finances,” added McKay. “And it’s
encouraging that at least a quarter of Americans say they plan to save
at least some of their tax refund. Tax refunds are an excellent way to
jumpstart savings and put money away for retirement, education or a
rainy day. ”
About The American Tax & Financial Center at TurboTax
Established in November 2012, The
American Tax & Financial Center at TurboTax provides objective
and independent data and insights on tax and personal finance trends.
The Tax Center is now available to provide taxpayers, policymakers and
media with resources and expert commentary on the impact of taxes on
The center’s primary goal is to help Americans in understanding
financial matters so they can make informed financial decisions. The
center educates and advocates for individuals by helping them take
ownership of their financial future. For more information, visit The
American Tax & Financial Center at TurboTax at www.americantaxandfinancialcenter.com.
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