Last year, three out of four taxpayers received a refund, according the IRS, averaging about $2,700.
What people do with their financial windfall varies. Some splurge on a new toy, say an iPad or car, while others pay bills or needed repairs. Some put it away for a rainy day. And some do a little bit of everything.
It depends on whom you talk to.
While more than 40 percent of the 109 million people that receive tax refunds use it to pay down debt, area merchants count on consumers not to be too austere.
Randy and Mandy Latner from Tuscaloosa, Ala., who were shopping at The Mall at Barnes Crossing in Tupelo last week, said they plan to use their tax refund from the IRS to take a vacation. But where they’ll go depends on the size of the refund.
According to the Turbo Tax website, about 12 percent of Americans will spend their tax refund on vacation.
But the refunds are arriving a little later than usual.
Kay Elliott, a 30-year veteran tax adviser for H&R Block on South Gloster Street, said the company will prepare more than 1,300 returns at that location alone.
She said the IRS is much slower this year in processing returns, taking about three weeks. And, she said, not all of the forms are ready.
The IRS is behind schedule due largely to the late passage of fiscal cliff legislation. The IRS said most forms had to be updated in response to the Jan. 2 bill.
Retailers hope for a little spending spree as the refunds slowly roll in.
Robbie Rains, general manager of Best Buy in Tupelo, said he has not seen an increase in business yet this tax season, but hopes to see people shopping with their refund checks soon.
“We usually do,” he said, “Especially in home theater sales.”
Rains hopes slower sales compared last year are due to the delays at the IRS, and he is optimistic that business will pick up in the next few weeks.
“March is usually good because of March Madness,” he said. He also said that Best Buy runs weekly ads and they price match with competitors to attract customers looking to spend their tax returns.
DON’T SPEND IT ALL
But many financial experts say more Americans could benefit from setting aside money this year. Several top advisers say using tax refund checks to establish an emergency fund is a wise move.
The National Endowment for Financial Education said an emergency fund should be set up, and it should be equal to three to six months of living expenses.
Analysts also say that now is a good time to invest in your home.
Linda Cummings of Tupelo already has filed her return and plans to put her refund toward a new roof.
But spending their tax returns – or at least some of it – is the prevailing attitude for most people.
And a variety of businesses, from furniture stores to automobile dealerships, offer special incentives and promotions to lure shoppers.
For example, Bill Stennett, finance manager for Barnes Crossing Hyundai, said tax season is the dealership’s busiest time of year.
“In February, March and April, we can average 300 cars a month,” he said.
The dealership is capitalizing on the tax season spending trend by offering its “Tax Max” program to customers.
Car buyers are invited to complete a simple tax return by bringing in their W-2 and Social Security card. The information is entered into a program that estimates the return amount and allows customers to direct the funds to be paid to the dealer.
Stennett said the IRS’ slow start this year has made an impact. He said they average about 40 participants in the Tax Max program.
This is the third year Barnes Crossing Hyundai has offered the program. There is a $39 fee to file through the dealership.
But before deciding what to do with a tax refund, taxpayers have to file their taxes first.
Those who have not yet filed have until April 15. The IRS website said those who file online will find out the status of their return within 24 hours compared to three to four weeks for those who file on paper. About 80 percent of taxpayers filed online last year.