Don't Mess With Taxes

Judging from readers who voted in our filing extension poll, it looks like most of you got (or planned to get) your taxes done in the nick of time. Final results are in the lower half of the left column (poll #5).

Conventional wisdom is that most of us procrastinators put off the tax task because we owed, but that's not always the case.

As I mentioned yesterday, the hubby and I are getting a refund. Now we must decide whether to save or spend the money. If you, too, got tax cash back, here are some suggestions on what to do with it:

1. Add to your retirement account. Whether it's a tax-deferred traditional IRA or a tax-free Roth account, either way the money will help when you're ready to exit the rat race. The sooner you put money into an account, the sooner it will start compounding.

2. Pay off your credit cards. Yeah, yeah, you're tired of hearing this, but with interest rates rising, any chance you get to pay off or at least pay down expensive revolving credit debt is a smart move.

3. Open an emergency fund. This account could be a lifesaver if your car or major appliance breaks down. With a little cash stashed away, you can cover unexpected expenses without having to resort to overburdening your charge card (see #2).

4. Improve your mind. Always wanted to study archaeology? Well, you probably didn't get enough back from the IRS to actually pay for a trip to a dig site, but you could take a class at your local university. If you want to be more practical, consider classes that could help you advance in your current job or get you started on a new career.

5. Treat yourself. You don't have to fritter away your entire refund, but it's not a crime to splurge a bit. Get your nails done. Buy that video game you've been wanting. You deserve a reward for making it through tax season.

One final nag. If your refund was excessively large, you might want to consider adjusting your payroll withholding.

Sure, it's nice to have that big lump sum of cash once a year. But if you get it regularly throughout the year, you can take the money, put it in a savings account and earn yourself some interest so you'll have even more of your money to do with what you please.

Just think about it, OK?

And please take a few minutes to vote in the new poll on how you plan to spend your tax refund.

Today's Tax Tip: If you just filed and asked the IRS to send you an actual check, get ready to wait. Give the tax man a couple of weeks to get your return into the system and then track your money at the agency's Where's My Refund site. Find out more here.