Put Your Tax Refund to Work, Advises TTK & Associates Accounting

April 9, 2012 - PRLog -- EGG HARBOR TOWNSHIP, N.J. – Federal tax refunds averaged $3,022 in 2011 and should be just under that in 2012, according to the IRS.  Forgoing the argument that your “refund” is just the government’s payback of the interest-free loan you gave it during the year, it’s still a nice windfall, just in time for that summer vacation.

Or maybe not.

“Unless your financial house is in order, I wouldn’t advise spending your tax refund on a trip or other extravagance,” says Emily Vu, president of TTK & Associates, an accounting firm with offices in South Jersey.  “Despite the temptation – and I know it’s very tempting – if you make that money work for you, you can actually increase the value of your refund.”

Vu advises her clients to first use their refund to pay down debts, especially those with higher interest rates.  If you can pay off a $2,000 credit card bill that’s charging even 9.99 percent interest, you’ll be saving between $150 and $200 that you’d have paid over the course of a year if you’ve been making minimum payments or slightly more.  “That’s far more money back in your pocket than the interest you’d earn from even the most generous CD these days,” she says.

Vu frequently recommends these options as well:

•   Make a repair or improvement to your house or car.  If you’ve been deferring a needed repair, the problem may get worse, so now might be the time to get it fixed.  And if you need a new water heater, furnace or windows, choose something that’s more energy efficient. Aside from the savings you’ll reap on your monthly utilities bill, your purchase might qualify for a credit on next year’s tax return.

•   Make one extra mortgage payment.  The entire amount of the payment will go toward the principle, and if you do this each year when you get your refund, you’ll save a few thousand dollars in interest and pay off your loan well ahead of the 15- or 30-year term.

•   Fund a traditional IRA.  Every dollar you put into an IRA is a dollar that won’t be taxed this year.  So if you put $3,000 into your IRA, that’s more for your retirement and $3,000 off your adjusted gross income.  “Consider this if you have no debt to pay down or pressing repair needs,” Vu suggests.

•   Educate yourself.  Take a course that will enhance your skill or provide a new one.  Education credits at a college or trade school can make you more marketable in your career, or help put you on the path toward a different one.

•   Save it.  Bolster your savings so you have a cushion against job loss, a medical expense or unexpected repair bill.

“Don’t look at your refund as a windfall of discretionary cash,” Vu says.  “Look at it as an opportunity to give yourself a little bit of security, or to sleep a little better at night.”

About TTK & Associates

TTK & Associates was founded by Emily K. Vu and provides a full range of accounting services that includes bookkeeping, payroll, tax planning, and tax preparation. TTK specializes in assisting individuals and business owners with tax audits and back tax problems. Its tax professionals will work with the client to resolve tax issues and fight for their right to fair treatment.  For more information on TTK & Associates, call 609-484-0005 or visit www.ttkassociates.com.

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