Tax Tips: The Best Ways to Spend Your Tax Refund

Getting your tax refund is exciting and although you may want to spend it on something fun, our tax tips will help you to make the most of your return to improve your financial wellbeing and set yourself up for a future that is a little less stressful. 

saving in piggy bank

Tax Tips to Help You Make the Most Out of Your Tax Refund: 

1. Pay off your debt 

This should be the priority whenever you have something extra at the end of the month or if you receive your tax refund. Debt can get out of control very quickly, and you should aim to pay off the bills with the highest interest first. Paying off your debt as soon as possible leaves you in a more secure position financially, and it will help you to avoid the stress of debt collectors knocking on your door.

2. Create an emergency fund 

Life can go very wrong, very quickly. Accidents, medical emergencies, car troubles and loss of income can ruin any person financially if there is no emergency fund to cover unexpected expenses. To avoid this, you should build an emergency fund that will help you to cover your living expenses for at least three months, but ideally up to six months. Even if you can’t put such a large sum away, any little bit will be beneficial when misfortune strikes. 

3. Increase your insurance coverage 

Protecting the lives of your loved ones as well as your property is always a sound investment. If you are financially sound in other ways, you can put your tax refund to good use by increasing your insurance coverage to include all property and the lives of your dependents. Accidents, damage and theft, are traumatic experiences which are made even worse by not having adequate insurance coverage. 

4. Boost your retirement

It is never too early to start putting money away for your retirement. Even if you already have a retirement fund, your tax refund can help you to grow it even more. Most Americans are not saving enough for their retirement. 22% of Americans don’t even have $5000 set aside for their retirement. Don’t gamble with your future, instead use your tax refund to prepare for your retirement.  

5. Start a savings fund

Whether you have your eye on a new car, a family vacation or if you’re putting money aside for your children’s education, you can use your tax refund to start saving for those big financial goals that you want to achieve. If you get into the habit of saving instead of getting into debt, your overall financial wellbeing will be much more sound than the average person.

6. Invest 

If you’re already in a sound financial position, you can use your tax refund to improve your situation even further by making a sound investment. Whether you decide to invest in stocks or use the money to upskill yourself, your tax refund can give you the push that you need to set yourself up for financial prosperity. 

7. Make improvements to your home 

The key is to make improvements that will increase the value of your home, help you to save on expenses or that will improve your quality of life. Avoid making improvements that will end up costing you more over the years, like installing a swimming pool that needs constant maintenance. Instead, you may want to improve the insulation in your home to bring down your heating bill or give your house a fresh coat of paint to enhance the aesthetic of the property.  

8. Replace an item that cost you money with a more efficient model 

If you own an appliance that gets used regularly, but it’s not a very efficient model, you can use your tax refund to replace it with something a little more modern. Old refrigerators, washers and dryers tend to use more energy to run, which can make your utility bill soar. Investing your tax refund in a newer appliance can help you to save money over the long run. 

9. Donate to charity 

If you’re in the fortunate position where you have financial stability, you can use your tax refund to help those who are less fortunate than you. Do a bit of research into charities in your area and consider donating to a cause that you feel passionate about.

For more tax tips and information on your tax refund, contact accounting service experts, Georgen Scarborough Associates, PC. today.

Tax Tips for Summer Jobs from Georgen Scarborough

When you think of your summer job, or if you’re starting as an entrepreneur, taxes might not be at the top of your priority list, so here are tax tips that you need to keep in mind. This guide from Georgen Scarborough Associates, PC will help you to make the most out of your summer earnings without getting into hot water with the taxman.

Tax Tips for Summer Jobs and Entrepreneurs from Accounting Service Experts summer

Understand your type of income 

How your income is classified will have a significant effect on your taxes, so it is essential to understand whether you are self-employed, or if a business or company actually employs you. 

There are many forms of self-employment, including being an independent contract worker that performs services such as babysitting, cleaning services, dog walking and many more. Skilled workers such as writers, photographers and designers can also be self-employed as freelancers. The basic premise of self-employment is that you have the power to decide on work you accept, clients you want to work with and the terms of the contract. 

If you’re self-employed, your income will be reported on Schedule C or Schedule C-EZ (profit or loss from business). Self-employed taxpayers can claim business expenses that you may not even be aware of, and that differ from industry to industry. That is precisely why you need the services of a certified public accountant who knows the rules and understands the laws surrounding tax expenses and claims for different industries. 

If you are an employee of a business, your employer will deduct tax from your paycheck, instead of you having to pay estimated taxes to the IRS every year. 

Reporting Income 

Regardless of your employment status (whether you are self-employed, or employed by a company), you will have to report income from all sources on your tax return. There is a threshold for income that you need to cross before you start paying taxes, but even if you don’t cross the limit, you still need to file a tax return. When reporting your income, remember to include income from any side jobs, self-employment opportunities as well as formal employment. 

A source of income that is often overlooked is barter income. This is a form of income where you are paid in goods or services in exchange for the work that you do. For example, if you spend time teaching someone’s child to swim, and they give you a gift card to get your car washed at their car wash business, it is considered income from self-employment and needs to be reported. 

File your tax return 

You should always file a tax return, no matter your income. Sometimes, your income won’t exceed the minimum gross that is set for filing requirements, but even in such an event, you may still want to file if taxes have been withheld from your pay. Your tax return may entitle you to claim money back, or it generates a tax refund if you’re eligible for a refundable tax credit such as the Earned Income Tax Credit or the American Opportunity Tax Credit. 

Although you need not know all the tax rules, if you are self-employed or an independent contractor, you need to keep a record of your income and expenses such as mileage, and materials purchased to perform your job. To make it simple, use a service such as QuickBooks so your information can be exported at tax time.

For more tax tips and information on your summer job taxes, contact accounting service experts, Georgen Scarborough Associates, PC. today.