Are you getting a tax refund this year?  If you’re entitled to a refund from Uncle Sam, it might be a good time to think about what you’re going to do with those extra dollars you’ve got coming back to you.  The stalwart personal finance types out there will advise that a good use of a tax refund would be to pay down debt or tuck some money aside for a rainy day.

Those are certainly practical ideas, but one idea I like just as much, if not better, is to use a portion of your tax return to take advantage of the retail tax specials and promotions offered by grocery stores, hardware stores, and other retail outlets that would like to see a bit of your tax return pumped into the economy.

Spending your tax refund might seem a bit counter-intuitive in a down economy, but if you can put those dollars to work for you in a real way, then I’m all for it.

Between now and April 15th, manr retailers offer tax savings in the form of coupon and gift card promotions.  For example, Albertsons has an offer like that right now – buy a $300 gift card, get $30 free.  I love these types of deals because if you have the cash to spare, it’s an instant 10% profit on your money.  You can’t make that kind of cash in an investment account that quickly.

I would also argue that while the 10% bonus you’re going to earn might be less than the interest saved if you have a credit card at a rate higher than 10% interest, using your tax return to purchase a grocery store gift card is like having a small emergency fund in place. You’re going to shop sometime in the next few months, and the average household in America spends a lot more than $300 a month at the grocery store.  A good coupon shopper who is watching for deals is going to be able to parlay that free $30 gift card into double or even triple the value of the incentive card, thereby increasing the savings associated with participating in the retailer’s tax incentive promotion.

It isn’t just grocery stores that offer this type of savings.  In past years, I’ve seen Home Depot, Wal-Mart, Sears, and others offer these types of promotions centered around changing in your tax refund for a gift card.  Think about it.  If you know you have a big home project coming up, and you’re going to pay cash for it anyway, paying for the project now in the form of a gift card purchase to secure a 10% or $30 off coupon will defray a portion of the overall outgo for the project.

My one caveat would be to make sure you’re participating in a tax refund promotion from a store that is solvent, meaning, if you suspect the local hardware store is in danger of folding, stick to the big-box retailer or grocery store for these tax refund promotional incentives.

So if you have the money and those deals are happening in your neighborhood stores, it’s well worth the free bonus dollars and coupons to convert your tax refund into store dollars.  Couple that with coupons and other instore savings, and you can really make those dollars work for you!

Tags: gift card promotions, gift cards, IRS, personal finance tactic, savings, shopping strategy, tax refund, tax refund promotions
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Tax season is upon us, and really, it’s one of my favorite times of year, even if I owe money to the IRS.  I know, that sounds strange, but it gives me a chance to clean through a ton of paper, file, and organize my house a bit.  Plus, in the years I get refunds, I like tearing through it to get my refund quickly and put it to good use.

One thing I don’t do no matter how badly I want/need my refund is to use a tax service that advances me my refund.  Here’s why….

The “rapid refund” type services are in the business of making money by taking a percentage of your refund as a loan fee for service.  It goes without saying then that there are some services out there that are going to find ways to get you the largest refund out there they can, and some have been known to use unscrupulous tactics to do it, leaving you open to an IRS audit.  The more they “find” you, the higher their cut of your tax refund.

If you can file in a quick enough manner using a reputable service like Turbo Tax, and you have it set up to electronically deposit your funds into a checking account, you can receive your tax return from the feds in as little as 9 business days.  When all’s said and done, even if you’re facing a tough time with money, waiting that few extra days can save you as much as 10-20% in loan fees, keeping all the money in your pocket.  Turbo Tax is free to e-file your Federal taxes if you have a very basic tax return, and if you wind up having to upgrade to a paid version, the money you’ll spend will still be cheaper than the refund loan.

Even worse are the refund loans that front loads the balance on a pre-paid Mastercard.  HR Block, whose Tax Cut software is similar and comparable to Turbo Tax, offers the pre-paid Masercard as an option for getting their Refund Anticipation Loan product.  The fine print is that there may be additional fees on top of the loan fees.  So if you feel you have no choice but to go down the refund loan path to get your tax return this year, don’t let anyone talk you into the pre-paid Mastercard option – it will only eat even more of your hard-earned money.

Ultimately, you need to do what’s best for your family.  But the technology and software available to do your own taxes and get a rapid return on your own has cut the tax return process down to less than two weeks for most federal filers (your state return could take longer).  If you need to do the refund loan option, stick with a reputable firm and not a fly-by-night outfit.  HR Block might be your better choice.  But if you can hang tight for the money, you’ll do better in the long run by filing on your own and waiting the few days for the IRS to direct deposit your funds. You’ll save several hundred much needed dollars that can go a long way towards paying bills or buying much-needed household purchases.

Our top three choices for do-it-yourself tax software:

Turbo Tax

HR Block’s Tax Cut

Free Tax Usa

For more information about tax filing for 2008, go to www.irs.gov.

Tags: 2008 tax season, free tax USA, IRS, rapid refund, refund anticipation loans, refund loans, Tax, taxes, TurboTax
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