AICCCA's Three Dos and Three Don'ts for Income Tax Refund

Fairfax, VA - January 31, 2011 - Consumers who overpaid their taxes in 2010 have been anxiously awaiting this day when employers deliver annual W-2 earnings statements so they can file their taxes and get a refund from Uncle Sam. The Association of Independent Consumer Credit Counseling Agencies encourages consumers to make the most of their tax refunds by following some simple dos and don'ts.

"Many consumers view their tax refunds as 'found money' and spend it without first reviewing how the money could better their financial situations," said Dave Jones, president, AICCCA. "Those who give some thought as to how best to use their tax refunds could make substantial improvements in their personal finances."

Make the most of your tax refund with AICCCA's Three Dos and Three Don'ts for tax refunds:

Three Dos

1. Do pay down credit card debt. Getting out of debt is often at the top of people's New Year's resolutions and using your tax refund toward existing balances is a great way to get started. In addition, substantial interest charges can be saved by paying down your balances.



2. Do save for emergencies. The best way to stay out of unwanted debt is to establish a savings cushion of three to six months of living expenses. Use your refund to start an account or add to your existing account.



3. Do invest in your future. Add to your 401(k) or other retirement account. You might also consider opening or adding to a child's college education account.
   
   

Three Don'ts

1. Don't apply for a Refund Anticipation Loan. The fees and interest associated with these loans are very high. Instead, file an electronic tax return and you will receive ALL the money you are entitled to via direct deposit in about 10 days.



2. Don't hurry through preparation of your tax return. Make sure you properly fill out your tax return to avoid mistakes, a possible audit and to assure you don't leave any money on the table. Double check your math and remember to sign your return.



3. Don't spend without a plan. If you decide that you will spend your tax refund, give some thought to what you will buy. Instead of spending freely until the money runs out, consider putting the money toward home improvement or an upgrade to your summer vacation.