Tips for consumers expecting tax refunds

Whether you’re getting a regular federal, state or local tax refund, or some kind of unexpected windfall, you should have a plan for what you’re going to do with it, all while avoiding potential scams.

Pay off debt

If you have revolving debt (credit cards), the best return you’ll get on your money is paying down your credit card accounts that may be charging you 12 or 20 or 25 percent interest. 

Save for a rainy day

Financial experts recommend that people have an emergency fund representing at least six months’ worth of expenses. If the last 2-1/2 years have taught us anything, it’s to expect the unexpected. If you don’t have an emergency fund, now is a good time to start one if you can.

Sock the money away

If you don’t have high-interest debt and you have a healthy emergency fund, consider putting your refund in your children’s college fund or your own retirement account.

Watch out for scams

Don’t click on email or text links that say they’re from a government office or tax entity, and don’t supply any personal information to anyone who contacts you by email, phone or text if you weren’t expecting specifically to hear from that person or office. Con artists kick into overdrive when they think they can capitalize on people’s desperation or greed. Times when consumers are expecting refunds are the perfect time for scammers to try to take advantage of people. If you’re contacted and think it might be legit, call the government office at a number you look up independently. 

Use our resource on robocalls to learn more about how to protect yourself:

Avoid refund anticipation loans

Refund anticipation loans are what they say — a loan against a refund you’re expecting. They’re infamous in the spring during tax filing season. But they’re costly and unnecessary. They ask you to pay a fee to get your own money. And if the amount you receive early is more than you’re actually entitled to, you’ll have to figure out a way to pay it back. Don’t fall for one.

Avoid websites advertising early payments

If you use a search engine to try to get information about tax refunds or extra payments, you’ll inevitably come across some websites that falsely boast about tricks you can use to get your refund faster. Watch out for any website that asks for your banking information or asks you to pay a fee or provide your P2P account information (Zelle, Venmo, CashApp, etc.) to supposedly receive your refund more quickly. 

Make sure your information is up to date

If you’ve moved in recent years, make sure your local and state tax offices and the IRS have your current address in their files. If you’ve moved temporarily or recently, fill out a change-of-address form with the U.S. Postal Service, which will forward first-class mail at no charge for one year.

Know when to expect your refund

If you don’t get your refund in a timely fashion, reach out. Your refund could have gone into the wrong bank account or been mailed to the wrong address or even stolen from your own mailbox.