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Tax refunds going toward bills
Income tax season in full swing
april 15 calendar
Click here to see IRS tax tips. - photo by IRS graphic
A penny saved may be a penny earned.
But the extra pennies from this year’s tax returns won’t be jingling in piggybanks for long.
“What I get back from the state goes straight in to paying bills,” Timothy Kuhns, 36, said. “And I’ve got child support to pay. So my federal goes straight to that.”
With more coming to her this year, Jaleesa Miller, 20, will make her way to a car lot.
“I’ve been without a car for about a year,” said the single mother. “This year that’s my treat to myself for working so hard last year.”
The end of January, two months before the April 15 deadline, had filers making beelines to tax professionals as soon as W-2 pay vouchers were in hand.
Lisette Vila of Liberty Tax Service said the surge even included some trying to file before receiving their W-2s.
“In tax history, generally, this would be the last week of peak,” Vila said Monday. “Somewhere in March we’ll have the more hesitant customers, the ones that think they’ll have to owe.”
Foot traffic is already up more than 200 percent compared to last year in the office averaging 144 returns a week.
“What we see right now, during peak time, is just people wanting money back, knowing that they’ll get a refund,” Vila said. “They want to make sure that they’re getting every penny out there that it is for them.”
Dr. Michael Toma,
Armstrong Atlantic State University economics professor, thinks the consumer trend is toward putting tax refunds back to work, “budgeting expenditures based on what their refund is going to be.”
“It’s not like the tax refund is any newfound present under the tree,” said the AASU Center of Regional Analysis director. “It’s not extra money.”
Paying down debts with refunds has become the most popular use, according to Nancy Kornegay, owner of Dominion Tax Service.
“I’ve just seen more of an urgency, on my end,” Kornegay said. “People are coming in and needing that money, right then…I’ve even seen the military needing it.”
This year, tax filing for about 65 percent of her clients has slowed since the IRS had to credit those who did not get the economic stimulus last year.
“The only thing that’s making it [refund amounts] increase this year is that rebate,” Kornegay said. “If you didn’t get that money last year, your refund may go up about $300, depending on the amount of the stimulus.”
Also bumping up refunds was new legislation that included an extra $7,500 for first-time homebuyers, increased standard deductions and more for exemptions.
“With an uncertain economy and so many tax law changes last year, taxpayers need to do what they can to ensure they get all the credits and deductions they are entitled,” said H&R Block spokesperson Elizabeth McKinley.
Though “we definitely have a consumer-driven economy,” Toma doubted tax refunds would pick the collapsed economy back up.
“There are economist theories to suggest when consumer spending is weak, the government may choose to intervene to prop aggregate demand,” Toma said, explaining two-thirds of all output is produced for consumers.
But even with the federal economic stimulus last year, which “helped a little bit,” Kuhns is still trying to cut corners.
The unemployed, nearly 14-year county resident depends on a scooter that gets “almost 100 miles for a tank of gas,” to get around town.
With food and gas prices “like a roller coaster all the time,” it seems the only constant for Kuhns is change.
But Miller hopes 2009 brings a “drastic change,” for the better.
“Even if I see a little change, I’ll be satisfied with that,” she said.
Stability is in the forecast as the year progresses, according to Toma.
“The economy will continue to shrink and contrast in second quarter of this year, perhaps the third quarter, and growth will emerge in the fourth quarter of ‘09,” he said.
As for Kuhns, he is just rolling with the punches.
“If it gets better it does. If it don’t, there’s really not much you can do about it,” Kuhns said.
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