How Americans are spending their tax refunds, stimulus packages
Medical bills, food, mortgages and investment. These are some of the things Americans plan to spend their tax refunds and stimulus checks on after numerous job losses or extra expenses during the coronavirus pandemic.
Catherine carver, for example, devote all of its tax refund and stimulus measures to reducing its medical debt. In 2019, she was diagnosed with Fragile X Syndrome, a genetic condition that causes a series of developmental issues. She had unexpected health problems during the pandemic requiring a few emergency room visits and physical therapy.
“My tax refund and stimulus checks were unfortunately 100% used to pay off the debt,” says Carver, 30, who lives in Indianapolis and works as an assistant manager at a state financial aid center. .
“At this point,” she said, “every little bit counts. “
“Crucial” tax refund for stability
More than half of Americans say receiving their tax refund is crucial to their financial stability, according to Credit Karma, which surveyed more than 1,000 adults in April. Data has been provided to USA TODAY exclusively.
About 47% of Americans say they plan to save their refund, and more than a third plan to use the money to pay for necessities like rent, groceries and other bills, data shows . More than a quarter say they will use the money to pay off the debt.
Almost 40% of those surveyed were unemployed at some point since February 2020 during COVID-19.
The financial story of the pandemic is a ‘two-city story’ in which some Americans remained employed and saved up refunds and stimulus checks while others struggled and used the money to cover necessities, explains Colleen McCreary, Human Resources Manager at Credit Karma.
“For most Americans, their tax refund is the biggest paycheck they’ll receive each year,” McCreary said. It “creates a lot of anxiety” when they are forced to use their repayment to pay for their necessities and cannot go into debt or save.
The Internal Revenue Service has issued nearly 81.5 million income tax refunds, the average amount totaling $ 2,865, according to agency data through April 30. About 64% of people had the same or a larger federal tax refund this year compared to 2020, according to Jackson Hewitt.
Save and invest
While millions of people rely on their repayments to pay their bills and other expenses, others used the money to invest for the first time.
Stephanie Hampton, 24, is one of these new players in the market.
She graduated with a theater degree in 2019 and was saving money to move to New York City, where she hopes to become a Broadway actress.
When the pandemic hit last spring, she was fired from her job at the hotel. To reduce expenses, she lives with her parents in Hamilton, New Jersey. In the fall, she got a job as a bookseller at Barnes & Noble.
Hampton, who received a $ 1,000 tax refund and a $ 1,400 stimulus check, set the money aside, then placed some of the money in an E * TRADE brokerage account for build up a nest egg.
“I’m in a better financial situation now than I’ve ever been in my life,” says Hampton, who has regularly paid off his credit card, accumulated savings and maintained a good credit rating. “So I started investing in the stock market,” she says. “It was definitely a learning experience. “
About 13% of Americans plan to use their tax refunds to invest, according to Credit Karma.
“As terrible as this pandemic has been, my family has been extremely blessed,” said Hampton. “We didn’t have to worry about bills or where we were going to live.
Some Americans deal with late repayments
Others weren’t so lucky.
Stanley Leary, 59, is still awaiting his tax refund after filing his return in February. He expects to receive reimbursement of more than $ 10,000.
“It’s a big deal. This deferred tax refund would cover at least two to three months of bills, ”says Leary, who lives in Roswell, Georgia. He is a freelance freelance photographer and videographer.
Typically, the IRS sends most refunds within 21 days of taxpayer filing their returns. But for some early filers, the wait for a tax refund was six to eight weeks.
“The IRS didn’t tell the Americans when they were going to conclude this,” Leary said. “The tension will grow every day and every week in the future if we don’t get paid.”
The IRS holds 29 million tax returns for manual processing, contributing to more reimbursement delays than is typical in a normal production season. The slowness in processing is due to sweeping tax code changes, limited resources, outdated computer systems and a backlog of unprocessed 2019 paper tax returns, according to Erin Collins, the national taxpayer lawyer.
About 59% of taxpayers say they received their federal tax refund on the same time as or faster than last year, according to Jackson Hewitt.
“This year, more taxpayers are waiting longer than ever before for their tax refund,” said Mark Steber, director of tax information at Jackson Hewitt. “But that said, a lot of them get their money quickly and efficiently. So while the number is much higher than last year, the vast majority of taxpayers are successful in filing their returns on time and getting their refunds. “
The total number of refunds issued this year are down 5.8% – or nearly 5 million returns – compared to the same period a year ago, according to IRS data as of April 30.
Americans spent stimulus on necessities
Tim Gresham, an Army veteran who lives in Newnan, Ga., Says he and his wife live on $ 794 a month on his disability insurance. He’s unexpectedly had multiple heart surgeries this year and the couple have fallen behind on bills.
They allocated all three rounds of their stimulus checks to food, clothing and other essentials.
“It’s really depressing. The fight is real, ”said Gresham, 55. “The stimulus checks were vital. If it hadn’t been for this, my wife and I wouldn’t have been able to get by.
Over 80% of Credit Karma respondents say they have received at least one stimulus check this year. About 40% say they used the money to pay for necessities such as rent, groceries, and other bills, while almost 30% used the money to pay off debt. About 41% saved money.
“I don’t like to take things for free, but right now I don’t really have a choice,” Gresham says.
Léary, the photographer and videographer, received all three rounds of direct payments, which he allocated to his mortgage.
“We got help from family, friends and even someone who sent us money anonymously to help us directly with our mortgage,” Leary says. “We weren’t 100% relying on government support, but we definitely needed help. “
This article originally appeared on USA TODAY: Where is my tax refund? How Americans Spent Refunds and Stimulus Checks