CPAs advise viewing tax refund as an investment opportunity

For More Information: Amy Johnson, Senior Manager, Public Relations E-mail: ajohnson@ohio-cpa.com 614.764.2727, ext. 341

(Columbus, April 4, 2008) – This year, the IRS estimates that 130 million American households will receive a tax refund and/or a rebate from the recent economic stimulus package. The average rebate is $2,492 and The Ohio Society of CPAs is urging taxpayers to think carefully before they cash those checks. A smart savings and investment strategy can help turn tax refunds into future money. These nine tips will help you think before you spend, making your refund stretch further.

1. Pay down credit cards and debt. This may not sound like the most exciting way to spend these extra dollars, but this can save more money in the long run. With interest rates for credit cards averaging 13-14%, the sooner you pay down your debt the more money you will save on interest.
   
   
2. Plan for retirement. Use your refund to open an IRA or put it toward your annual contribution. With a traditional IRA, your earnings grow tax-deferred and if you meet certain eligibility requirements, your contributions may be tax deductible. 
   
   
3. Save for college. With tuition rates on the rise, thinking about putting your kids through college someday may be stressful. Use your refund to open a 529 plan. Everyone is eligible because there are no income or age restrictions, and many plans have initial contribution amounts of less than $100. The proceeds can be applied towards any accredited educational institution in any state, whether it’s public, private, two-year or four-year. In addition, any unused balance can be used for another family member.
   
   
4. Establish or replenish an emergency fund. Generally, CPAs advise people to have at least six months’ worth of living expenses set aside in case of an unplanned life changing event such as job loss or medical disability. Setting up a mutual fund with your tax refund will help get your nest egg off to a strong start.
   
   
5. Refinance. With mortgage interest rates still low,   now may be a good time to consider refinancing your home. Many banks offer low- or no-cost options for borrowers with good credit. These types of finance options can help to lower your monthly payment without having to pay full closing costs typically associated with a refinance.
   
   
6. Make a larger mortgage payment. With extra money in your pocket, put it toward your mortgage. Making larger payments will pay down your loan principle quicker, saving you thousands in interest over the life of the loan.
   
   
7. Create a holiday fund. Instead of being stressed over the holidays or going in debt again, put your refund away for the holidays. This will help you start 2009 with less financial stress.
   
   
8. Buy Stocks. Stocks can produce nice returns even if you don’t have thousands of dollars to invest. Nickels and dimes can mean big returns over time. So, the earlier you start, the healthier your nest egg.
   
   
9. Make a charitable contribution. If you have paid off most of your debt and have a healthy savings, consider donating to your favorite charity. Cash contributions are deductible as long as you have a receipt or cancelled check as record.

If you regularly receive large refunds, you may be having too much money withheld for taxes from your paycheck. While it’s great to get an unexpected cash bonus, you could be investing that money throughout the year and growing your savings faster. When you have too much withheld, you’re giving the government free use of your money, so aim to have your withholding come as close as possible to matching your actual tax liability.

For more tax tips, visit The Ohio Society of CPAs' free online consumer resource, http://www.financialfitnessohio.com/, and get answers to frequently asked personal finance questions.

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The Ohio Society of CPAs, established in 1908, represents more than 24,000 CPAs in business, education, government and public accounting. The Ohio Society’s members not only meet statutory and regulatory requirements as CPAs, but also embrace the highest standards of professional and ethical performance. This is achieved through ongoing professional education, comprehensive quality review and compliance with a strict Code of Professional Conduct.

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