Americans make big plans for tax return monies

By Quirk's Staff | March 1, 2011

Reading time: 2 minutes

Abstract

The 2011 tax season has Americans looking for satisfying ways to allocate their funds. This year, more people are option to save the money or a rainy day or splurge on big-ticket items.

Industry/Market Focus:: Financial/Investment/Banks | Government
Content Type: E-Newsletter Article

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Editor's note: This article appeared in the March 28, 2011, edition of Quirk's e-newsletter.

With signs of an improving economy, many Americans are no longer compelled to spend their precious tax return dollars on necessities like gas and groceries, as was the case in 2008. In 2011, many consumers are keen to use their tax refunds to treat themselves or their families to a major purchase such as a new television or furniture, according to a study conducted by BIGresearch, Columbus, Ohio, on behalf of the National Retail Federation (NRF), Washington, D.C.

"Many Americans have spent the last few years paying down debt with their tax refunds, but for some, it's the perfect time to buy something nice for a change," says Phil Rist, executive vice president, strategic initiatives, BIGresearch.

Just over 13 percent of Americans will spend their refund on a big-ticket item, up from 12.5 percent last year. But with the economy also serving as a reminder that it's best to be financially prepared for the worst, more people will also put their refunds away for a rainy day (42.1 percent vs. 40.3 percent in 2010).

"Despite the difficult unemployment situation across the country, Americans receiving a tax refund this year seem eager to plough this money back into the economy," says Matthew Shay, president and CEO, NRF.

While some will toss frugality out the window, there are still 41.9 percent of consumers who plan to pay down debt. Other ways consumers will use their refunds include vacation (11.9 percent) and everyday expenses (29.7 percent).

Unsurprisingly, the number of people who file their taxes online continues to increase. This year, 57.6 percent of U.S. taxpayers will file their taxes online, up from just 50.1 percent in 2007. Additionally, 35.2 percent will prepare their taxes using computer software; 21.5 percent will use an accountant; 19.3 percent will use a tax preparation service; 10.9 percent will have a friend, spouse or other relative prepare their taxes for them; and 13.2 percent will prepare their taxes by hand.

Two-thirds of taxpayers are expecting a refund this year, up from 65.5 percent last year, but down from the percentage expecting a refund in 2009 (68.4 percent).