Should I Pay Off Debt with My Income Tax Refund or Put it in Savings?

It is that time of year again, getting tax refund back from the IRS. However, there are many that are wondering if this is something that they should spend or if they should save the money for later. The decision can be hard, especially if you are going to get a large sum of money. These are some things that you should consider to ensure that you are going to make the right decision about your tax refund that you are going to get.

How much money are you going to get?

You have done your tax return and you get a letter that they are going to give you a large sum of tax refund back. Now, you are wondering what you are going to do with it. Is this a huge amount of money, or just a small amount that you can’t really use anywhere?

You need to make sure about the amount of money that you are going to get back before you are starting to plan what you are going to do with it. Read more.

Will it be enough to pay off debt?

Will it be enough to pay off debt? You might feel that this is something to consider. To pay off your debt and to have extra money left at the end of the month. However, is this really something that you can do to get some benefits at the end of the month.

The tax refund that you are going to get might be not enough to pay off debt so that you can feel a difference at the end of the month. It might make a difference at the end of the day, but not in the short run. Then, you might want to reconsider if this is something that you want to do.

Do you have a savings plan that you can put the refund into?

The best thing that you can do, is if you have a savings plan. You can put the tax refund in there and make sure that it is getting interests. This is a great way to make sure that you have enough money when you have an emergency where you might need to get some extra cash.

You can also invest it so that you can have some extra money when you retire. And, every year when your tax return is done and you are getting money back, you can invest it with the previous year, to ensure that you have a huge sum of money when you retire.

Should you pay off some debt or save your tax refund that you are getting back? This is a common question that might be hard to answer. It is always tempting to spend the money immediately on things that you want to have. However, you can benefit so much more if you are going to save it or even paying off debt. With this information, you will know what is going to be best for you and the tax refund that you are going to get back this year. For more information visit:

Tax Return

Completing the Tax Return Form

Completing your tax return can be both frustrating and time-consuming, but the entire process can easily be facilitated by understanding concepts and procedures. You can use your annual return on paper or online – use the HMRC software or one of the much easy-to-use commercial software on the market. We recommend you to do it online if it is faster, prevents delays and there is no chance of it getting lost in the post.

The Deadline for Sending Your Tax Return Back

Deadlines vary depending on how you send your return back – these are the filing dates. The deadline for a paper tax return is 31 October following the end of the tax year, and this is the date HMRC should receive your annual return. If you are finishing this online, HMRC should receive your tax return by 31 January following the end of the tax year.

It is important that you meet these deadlines if it does not automatically run a late filing penalty of £100. Another £100 penalty will be incurred if this is still outstanding after six months.

Paper Tax Return

HMRC guarantees you to calculate your tax and inform you of the results before the payment deadline of 31 January following the end of the tax year. If you send your return after the filing date, HMRC can’t guarantee that you calculate your tax and tell you that the result in time for any 31 January payment.

If you even calculate your tax yourself or if your document is late, you can ask the HMRC for its pages and notes to help you work out your tax bill. No need to send the supplementary pages HMRC sends you as part of your tax return.

Online Tax Return

The HMRC online service is easy to use and saves time compared to the paper version. To use the online service, you have to register first by visiting the HMRC website and following the registration process. HMRC will then send you a Personal Identification Number and may take about 7 days.

So, we strongly recommend that you do not leave registering for the online service until 31 January. If you do then your return will be late and you will incur the late filing penalty- therefore does it well in advance? Once you have completed the online return you will receive an acknowledgment of receipt.

Keeping Records

In order to complete and correct tax return, you have to keep all records according to law. If your annual return is not complete and you are found by HMRC to owe tax, you may be essential to pay interest and a penalty. So keep all records and get it right in the first place.

Using Provisional and Estimated Figures

If you simply want to wait for the information which you need for your annual return, you can use provisional figures to evade delaying filing your tax return. If you use the provisional figures, remember to draw attention to this in the ‘Any other information’ box on the paper return or in the white space on the online return. Do not forget to replace your provision figures with the final ones you know them.

Sometimes you may have to estimate an amount, as the private proportion of motoring expenses or the cost of using part of your home for business use. You do not need to replace this figure and you do not have to draw attention to this kind of estimate. You will find available guidance about this on the tax return.