Most Americans don’t expect their tax refunds to last long.
In fact, 1 in 3 taxpayers plan to spend their refunds immediately, according to a new survey from tax preparation firm Jackson Hewitt. The company surveyed 1,000 American adults in March 2022.
Another 22% of Americans plan to spend their refund within three to six months, while 23% plan to save it until they “need it most during the year.” The rest of the respondents surveyed do not expect to receive a refund.
The average tax refund issued so far this tax season is $3,263, according to IRS data.
But Americans don’t plan to spend their refunds on electronics and dinner: 31% of respondents said theirs would go toward big bills, including rent, medical bills, debt and utilities. And 15% said they would spend their refunds on “essentials,” such as gas and groceries.
Only 5% of taxpayers surveyed said they plan to spend their tax refund on entertainment expenses such as vacations and concerts, while 2% said they would spend it on a major life event like a wedding or buying a house.
That Americans are considering spending their refunds on essentials is nothing new, says Mark Steber, director of tax information at Jackson Hewitt. “Large refunds are a good thing for many millions of Americans because they’re taking them and spending them wisely,” he told CNBC Make It. “They don’t spend it in Vegas or do a big pub crawl.”
Still, Steber encourages taxpayers receiving refunds to pay themselves 10% of it, if they can afford it. “Do something frivolous,” he says. “Buy yourself a big TV or go on a family trip.”
But whatever you do, don’t wait to send in your statement. The penalty for not filing your taxes by April 18 is 5% of your unpaid taxes for each month you are late filing, up to a maximum of 25%. You could also accrue 0.5% penalties each month unless you pay an estimated amount before tax day.
Taxpayers have the option to request an extension, which will give them an additional six months to get their returns by October 17.
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