PDF: IRS last minute tipsTax refund bounce* $3,036 — Average tax refund in 2010* $2,770 — Average tax refund in 2009* 75 — Percentage of taxpayers getting refunds* 2.4 million — Number of Georgia tax returns filed electronically this year, up 9 percent from a year ago* 1.6 million — Number of Tennessee tax returns filed electronically this year, up 0.2 percent from a year agoSource: U.S. Internal Revenue ServiceWhy bigger refunds?The Recovery Act includes:* $8,000 tax credit for first-time home buyers* $2,500 credit for qualified college expenses* $2,400 exemption for unemployment benefits* Up to $1,500 in tax credits for energy conservation investments* Increase in earned income tax credit and child tax credit* Deduction for state and local taxes on new vehicle purchasesSource: Internal Revenue Service
Last year’s tax refund helped Carmen Lindsey buy new appliances for her new townhome and this year’s refund helped her add a new patio furniture set.
“It’s the one time of the year I get a big chunk of money I feel like I can do something with toward a major purchase,” the 25-year-old East Brainerd homeowner said.
Like most Tennessee and Georgia taxpayers, Ms. Lindsey looks forward every year to getting money back from Uncle Sam on taxes paid the previous year. Nearly three-fourths of all taxpayers are expected to get a refund this year and, thanks to the stimulus package adopted by Congress a year ago, the typical refund this year is up nearly 10 percent to $3,036.
With extra tax breaks last year for children, jobless benefits and the purchases of homes, cars or heating insulation, the stimulus package helped add an average $266 to the typical refund check from the Internal Revenue Service.
The extra tax refunds are welcomed this year not only by recession-racked consumers, but by many merchants eager for the sales spurred by the refunds.
Steve Smith, who has sold cars for more than two decades at Big Hearted Smitty’s used cars on Rossville Boulevard, said up to half of the dealership’s annual sales come in the first quarter of the year due to the boost provided by tax refunds.
“For a lot of people who can’t accumulate money otherwise, this is the one time of the year they get some extra money to use as a down payment,” he said.
At Paniagua Auto Sales in Dalton, Ga., sales manager Edward Paniagua said tax refunds also help many pay cash for vehicles or get enough money for a down payment to buy a car on credit.
“The refunds really help our business,” he said.
Excluding the bump from last summer’s Cash for Clunkers program in August, new car sales in Hamilton County last month rose to their highest monthly level since September 2008, in part due to bigger tax refunds. March sales this year were up 68 percent from a year ago.
Furniture retailers, including Scott’s Furniture Co., in Cleveland, Tenn., also report higher sales due to tax refunds during February and March.
“We got a good spurt in sales when the refunds came through this year,” said Melinda Belk, assistant manager for Scott’s Furniture. “You can always tell when people get their tax returns. They are usually more apt to pay cash than to finance their purchases.”
A survey conducted for the National Retail Federation found most Americans more willing to spend rather than save their refunds this year. After two years of skipping family vacations and many big ticket purchases to pay down debt, only 43.9 percent of Americans said they plan to use their refund to pay down debt this year, down from 48 percent a year ago, the federation reported.
“Retailers planning special promotions over the next few months may find that shoppers are a bit more receptive to opening up their wallets than they have been for the past year,” National Retail Federation President Tracy Mullin said.
Gary Hurst, an EPB employee getting an extra couple of hundred dollars back this year on his refund, said he expects to save about 75 percent of his refund but spend the rest.
“Like a lot of people, I probably have more taken out of my paycheck for taxes than I have to (just) to make sure I save back a little every year,” he said.
But other taxpayers say they try to avoid giving the IRS any extra money through the year.
“I don’t want to give the government an interest-free loan, so I try to make sure my wage withholdings (for tax payments) match what I’ve got to pay,” said Matthew Canada, who said he will have to pay the IRS $18 to settle his 2009 taxes.