Medical bills, food, mortgages and investment. These are some of the things Americans plan to spend on their tax refunds and stimulus checks after numerous job losses or additional expenses during the coronavirus pandemic.
Catherine Carver, for example, has devoted all of its tax refund and stimulus measures to reducing its medical debt. In 2019, she was diagnosed with Fragile X Syndrome, a genetic condition that causes a range of developmental issues. She had unexpected health problems during the pandemic, requiring a few emergency room visits and physical therapy.
“My tax refund and stimulus checks have, unfortunately, been 100% used to pay off the debt,” says Carver, 30, who lives in Indianapolis and works as an assistant manager at a financial support center in the State.
“At this point,” she said, “every little bit helps.”
My tax refund and my stimulus checks have unfortunately gone 100%. 100 on debt repayment. At this point, every little bit helps.
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More than half of Americans say receiving their tax refund is crucial to their financial stability, according to Credit Karma, which surveyed more than 1,000 adults in April. The data has been provided exclusively to USA TODAY.
About 47% of Americans say they plan to save their refund, and more than a third plan to use the money to pay for necessities like rent, groceries and other bills, the data shows. More than a quarter say they will use this money to pay off the debt.
Almost 40% of respondents were unemployed at some point since February 2020 during COVID-19.
The financial story of the pandemic is “the story of two cities” in which some Americans remained employed and took out refunds and stimulus checks while others struggled and used the money to cover necessities, says Colleen McCreary, director of human resources at Credit Karma.
“For most Americans, their tax refund is the biggest paycheck they’ll get each year,” McCreary says. It “creates a lot of anxiety” when they are forced to use their repayments to pay for necessities and cannot get out of debt or save.
The Internal Revenue Service has issued nearly 81.5 million income tax refunds, the average amount totaling $ 2,865, according to agency data through April 30. About 64% of people had the same federal tax refund or a higher federal tax refund this year compared to 2020, according to Jackson Hewitt.
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While millions of people rely on their repayments to pay their bills and other expenses, others used the money to invest for the first time.
24-year-old Stephanie Hampton is one of those new players in the market.
She graduated with a theater degree in 2019 and was saving money to move to New York City, where she hopes to become a Broadway actress.
When the pandemic hit last spring, she was fired from her job at the hotel. To reduce expenses, she lives with her parents in Hamilton, New Jersey. In the fall, she got a job as a bookseller at Barnes & Noble.
I’m in better financial situation now than I have ever been in my whole life.
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Hampton, who received a $ 1,000 tax refund and a $ 1,400 stimulus check, put the money in savings, then placed some of the money in an E * TRADE brokerage account to get build up a nest egg.
“I’m in a better financial situation now than I’ve ever been in my life,” says Hampton, who has been paying off his credit card, saving money and maintaining a good credit rating. . “So I started investing in the stock market,” she says. “It was definitely a learning experience. “
About 13% of Americans plan to use their tax refunds to invest, according to Credit Karma.
“As terrible as this pandemic has been, my family has been immensely blessed,” says Hampton. “We didn’t have to worry about bills or where we were going to live.”
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Others weren’t so lucky.
Stanley Leary, 59, is still awaiting his tax refund after filing his return in February. He expects to receive reimbursement of more than $ 10,000.
“It’s a huge deal. This deferred tax refund would cover at least two to three months of bills, ”says Leary, who lives in Roswell, Georgia. He is a freelance freelance photographer and videographer.
Typically, the IRS sends most refunds within 21 days of the taxpayer filing their return. But for some early filers, the wait for a tax refund has been six to eight weeks.
“The IRS didn’t tell the Americans when they were going to conclude this,” Leary says. “The tension will increase every day and every week if we don’t get paid.”
It’s a big problem. This deferred tax refund would cover at least two to three months of bills.
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The IRS holds 29 million tax returns for manual processing, which contributes to more reimbursement delays than is typical in a normal filing season. The slowness in processing is due to sweeping tax code changes, limited resources, outdated computer systems and a backlog of unprocessed paper tax returns for 2019, according to Erin Collins, the national taxpayer advocate.
About 59% of taxpayers say they received their federal tax refund in the same amount of time or faster than last year, according to Jackson Hewitt.
“More taxpayers this year are waiting longer for their tax refunds than in the past,” said Mark Steber, director of tax information at Jackson Hewitt. “But that said, many of them get their money quickly and efficiently. So although the number is much higher than last year, the vast majority of taxpayers are successful in filing their returns on time and getting their refunds. “
The total number of refunds issued this year is down 5.8% – or nearly 5 million returns – from the same period a year ago, according to IRS data as of April 30.
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Tim Gresham, an Army veteran who lives in Newnan, Ga., Says he and his wife are living on $ 794 a month with his disability insurance. He’s unexpectedly had multiple heart surgeries this year and the couple have fallen behind on bills.
They put the three rounds of their stimulus checks towards food, clothing and other essentials.
“It’s really depressing. The fight is real, “said Gresham, 55.” The stimulus checks were vital. Without it, my wife and I could not have gotten away with it.
Over 80% of Credit Karma respondents say they have received at least one stimulus check this year. About 40% say they used the money to pay for necessities such as rent, groceries, and other bills, while almost 30% used the money to pay off debt. About 41% saved money.
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“I don’t like to take things for free, but at the moment I don’t have a lot of choice,” Gresham says.
Leary, the photographer and videographer, received the three rounds of direct payments, which he put on his mortgage.
“We had help from family, friends and even someone who sent us money anonymously to help us directly with our mortgage,” Leary says. “We weren’t 100% relying on government support, but we definitely needed it.”
