Many Americans are struggling financially this year, but no one really wants to sacrifice holiday gifts and cheer—especially after nine months of lockdowns and quarantine. Is it really so bad if you spend a little extra to put a smile on your family’s faces?
Unfortunately, the answer, if you’re like many Americans, is yes. Even the most frugal folks can find themselves wondering how they’ll pay off holiday credit card bills and travel costs during a good year. If you’re also unemployed and struggling, that adds even more burden. That’s why some folks file their taxes early—the tax return can provide a major chunk of cash to pay off your bills.
Of course, talking to local financial advisors in Hayward, CA is the best way to maximize your refund. Here’s an overview of how your tax return can help you recover from the holiday season.
Decide how to pay down your debt
When paying down your debt, it’s smart to look at the big picture. Where is your money going, and what are the interest rates? Credit cards are often the biggest source of post-holiday stress. For example, you could be paying anywhere from 14 to 25 percent in interest, so it’s in your best interest to pay more than the monthly minimums. Be sure to keep track of when the money is due, too—if you miss a payment, your late fees can tack hundreds or thousands of dollars onto your bill.
Generally, you should pay off your highest interest credit cards first. This will help you keep interest payments as low as possible. However, if you have small balances on other cards, it can be helpful and satisfying to pay those off completely.
Of course, if your payments are too much to deal with on your regular paycheck, your tax return can help.
E-file as soon as possible
If you need your tax return to pay off your debts, it’s prudent to file right away. As soon as your tax statements come in, you can go ahead and file your return. The best way to do this is to e-file your taxes and have the return directly deposited into your bank account—you could see your return in about 21 days from the time of filing.
Of course, not everyone is eligible for a tax refund, so don’t bank on this unless you know you’re going to get money back. There’s no sense in spending a ton of money on holiday gifts only to find yourself in deep debt come January.
Instead, work with local financial advisors in Hayward, CA to help keep your spending—and your tax liability—at a minimum. Putting together a smart saving and spending plan will ensure that you don’t have to scramble to file your taxes as soon as possible just to pay the bills.
For more information about tax returns, financial planning and more, call Menjivar & Company CPAs, Inc. today. We serve clients in the Castro Valley, Hayward and San Leandro areas, and would love to sit down with you and discuss how we can help.
Categorised in: Tax Tips