Tag: refund

“Forgive My Student Loan? But I just paid it off!”

Barb Wollan
Graphic from https:studentaid.gov

The announcement by President Biden last month about the new plan to forgive up to $10,000 (or $20,000, in some cases) of student loan debt has been great news for many Americans, but there may be people who are groaning instead of celebrating. If you are one of those people, I may have good news for you!

Here’s the kind of scenario that may have people groaning:
Jane Doe owed $5,500 on her student loans as of March 1, 2020. Even when the COVID-related “student loan pause” kicked in March 13, 2020, she kept making payments of $215/month, because her income stayed steady and she just wanted to be done with the loan. She made her final payment a month ago and celebrated being out of debt!

But then – on August 24 came the announcement that she would be eligible to have up to $10,000 in student loans cancelled! GROAN…. “Oh if only I hadn’t made those payments – I would have been out of debt anyway, and I could’ve saved that $215/month!”

Here’s the good news: Jane Doe can apply to her loan servicer for a refund of the payments she made voluntarily during the student loan pause! And THEN she can apply for up to $10,000 of loan cancellation. In some cases the refund may occur automatically. Note: she will only be eligible for $5,500 loan cancellation because that’s what her balance was when the pandemic hit. The debt cancellation is “up to” $10,000, but if your loan balance is less than $10,000, the cancellation is limited by the amount of your debt.

Did you continue to make payments on your student loans during the student loan pause (administrative forbearance) that began March 13, 2020?  You can apply to get those payments refunded to you, and if you’re eligible for student loan cancellation, you may WISH to request a refund if those payments brought your loan balance below $10,000. Contact your loan servicer to start that process.

THEN, stay tuned for information on how to apply for the debt cancellation. The government expects the application to open in early October. To verify that you are eligible for the loan cancellation AND to minimize administrative glitches, check step one and follow step two provided by Federal Student Aid.

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

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Where’s My Refund? Where’s my EIP?

Brenda Schmitt

I am one of several Iowa State University Extension and Outreach Field Specialists that assist families with tax preparation and e-filing. This past week, I have been receiving at least one phone call a day from individuals wanting to know where their refund is. Many tell me they have already been to the website to check their status. The only place individuals should be checking their refund status is at the IRS.gov web site. Likewise, if you are wondering about the status of your Third Economic Impact Payment (generally $1400/person), the IRS web site is your source.

IRS.gov is the only safe place to check your refund or your stimulus payment

Refund Status. There are ONLY THREE QUESTIONS that need to be answered when using the Get Your Refund Status link on the IRS.gov website: 1) The Social Security number of the person listed on the return as the FIRST NAME on the return (not the spouse); 2) Your FILING STATUS (single, married filing jointly, head of household, married filing separately, or qualifying widow(er)); and 3) the amount of your refund, which is found on line 35A of page 2 of your federal tax return.

Stimulus Payment Status. Here again, the IRS has THREE QUESTIONS, although they are different. The needed information is: 1) Your Social Security number; 2) Your date of birth; and 3) Your mailing address. The mailing address can be tricky if you have moved recently. Generally, you should enter the mailing address on the most recent tax return the IRS has processed from you. However, if you have not filed a tax return in recent years, use the mailing address on file at Social Security or the Veterans Administration. Note: The tool to check your stimulus payment only relates to the third economic impact payment, authorized in the American Rescue Plan signed in mid-March. If you have not received either of the first two payments, your only option is to file a 2020 tax return, even if you have no income to report. The tax return allows you to claim the first two stimulus payments, and also sets the wheels in motion to process your third payment.

If you “google” where’s my refund and are taken to a website that asks for additional information, such as your salary, mother’s maiden name, or any other personal information, you are in the wrong place; you may be giving your personal information to someone who is stealing your identity.

~ Brenda Schmitt

Brenda Schmitt

A Iowa State University Extension and Outreach Family Finance Field Specialist helping North Central Iowans make the most of their money.

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Tax Refund? Plan Yearly

Barb Wollan

We generally budget by the month or by the week — we plan our spending in relation to our income, and that’s how we meet our regular expenses. It makes sense.

A tax refund is different, however. It’s a “bonus” that only comes once a year; it’s often the biggest single chunk of income we receive during the year. If you expect a sizeable tax refund, I suggest you consider the whole year as you plan how to use it. Here are a couple of ways you might do that:

  • In a typical year, are there some big expenses that throw a wrench into your financial routine? Perhaps your tax refund can help you be ready for those expenses. Examples: holidays, back-to-school time, car maintenance (planned and unplanned), summer weekends away,… it could be anything. Setting aside part of your refund to help cover those costs can be a great way to remove stress and unwanted drama from your financial life.
  • Tax refunds are often the way families make special purchases, such as furniture, a computer, or new appliances. Your refund can help you meet an important family goal. Again, though, it makes sense to consider the whole year before deciding. That might mean thinking ahead to all the possible special purchases you might want to make during the year, and prioritizing which of them is/are most important. An example from my imagination: I can imagine getting to summer and realizing you need a new lawn mower, and really wishing you had used your tax refund to buy a lawn mower! Thinking about the whole year can help you get the most value from any special purchases!

No one can foresee the future, and trying to plan for the year doesn’t guarantee you’ll think of everything that might come up. However, if you make an effort to consider the needs of the coming year, you are more likely to be satisfied in the long run!

What are your plans for your tax refund? We’d love for you to share!

 

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

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Refund Advance? Resist the Temptation!

Barb Wollan 1 Comment

Tax season is coming up fast.  If you’re one of the millions of Americans who expect a hefty refund, you may be excited — impatient, even.

It’s important to have realistic expectations. If your refund includes the Earned Income Tax Credit OR the Additional Child Tax Credit, the earliest you’ll receive your refund is around February 27, even if you file on the earliest possible date in January. Congress passed a law two years ago requiring that those refunds not be processed until after February 15, to allow plenty of time for the IRS to gather and process the information it receives from employers around the nation.

The best way to get your tax refund quickly involves a few key steps:

  • File an accurate and complete return.  Don’t rush to file before you even have all the documents and information you need.
  • Be sure you claim only the dependents and credits you are entitled to.
  • File electronically. When paper returns are mailed in they take weeks longer.
  • Receive your refund via direct deposit.

What about refund loans? If you believe some advertising, or the sales pitches of some tax preparers, getting a refund advance is the easiest way to get your refund quickly. It may seem easy, but it’s actually risky.  If anything goes wrong with your refund, the loan will be due anyway, and how will you repay it?  If you can’t repay it on time, you’ll face additional fees and perhaps debt collection headaches.

A refund advance is a loan; the lender gives you money now, and you probably spend it. Then when your refund actually comes through, the loan is automatically repaid to the lender. But if the refund doesn’t come through as planned, the lender will turn to you for repayment, even if you no longer have the money.

What could go wrong with your refund? Actually, a lot could go wrong.

  • In some cases, people’s refunds are withheld in order to pay debts owed by the taxpayer — debts such as unpaid student loans, back child support, or other government debts.
  • In other cases, irregularity in paperwork can delay refunds. This might not mean that you don’t get your refund, but it might mean a delay, which could cause you some headaches with the lender.
  • One more situation when people don’t get the refund they expect occurs when there was an error in preparing their return. Perhaps you weren’t entitled to a particular credit, or perhaps you are not entitled to claim a dependent. You didn’t mean to cheat on your return, but due to an error somewhere in the process, your refund is less than expected.

Refund advance loans are advertised as no fee/ no interest loans. The catch, however, is that you are required to file your return through the tax service where you obtain the loan; their fees are often much higher than fees charged by a non-lending tax service. What’s more, if you qualify for free tax preparation, then there would be no reason to pay any fee at all.

Resist the refund advance, and be secure in your plans for using your refund!

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

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Tax Refund? Invest! (one way or another)

Barb Wollan

182106567If you’re expecting to get a tax refund this year, you may already have plans for what you want to do with it.  I’m not here to change your mind.  But I do have an idea for your consideration: use your refund as an investment.

Am I telling you to put it away for retirement?  Well, that’s certainly one possibility.  When you invest in financial assets that will produce income or grow in value, that pays off in the long run.  If you are 30 years old, and invest $1,000 of your refund in a retirement account that earns an average of 8% annually, you will have nearly $15,000 at age 65, just from that one deposit.  That’s a nice payoff. But financial assets are only one way to get a payoff from your money.

Let’s think of an investment as anything that over time produces value greater than the original cost – that is, anything that can be compared to planting a seed and seeing it grow.

As I see it, some purchases can be investments.  Buying a new or different car?  Maybe.  If you’re buying a car because you don’t like the color of the old one or you want a better sound system, I would not see that as an investment.  It doesn’t provide any long-term payoff.  But if  you’re buying a  car that is necessary so you can commute to a new job, that’s an investment.  It will pay off because it enables you to earn money at the job.

Likewise, a new computer could be an investment if it is going to be used to further your education, but if you’ll mainly use it to surf the web and pay games, then it may just be an expense… no long-term payoff.

If you’re buying experiences, you can also evaluate the payoff.  Some experiences will provide a greater payoff than others.  Some people plan a family outing each year with part of their tax refund.  Most family outings will have some short-term payoff, providing family bonding time and enjoyment.  But some outings provide greater long-term payoff.  If your children have never seen a live play on stage, then taking them to a community theater production might have greater long-term payoff (expanding their cultural awareness) than going to a movie that’s a lot like the other movies they’ve seen.

Paying debts is a common use of tax refund money.  It provides an immediate payoff, and some larger payoff too if it saves money in interest or means you won’t get evicted.  I suggest, though, that you take debt payoff a step farther and invest in financial security by setting up an emergency savings account that will prevent you from being in debt when tax time rolls around next year.

How will you invest part of your tax refund this year?  ~Barb

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

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