Money Management

The IRS has indicated tax refunds are around 4.3% higher this year than during the prior filing season. Learn more about these big refunds here. [[{“value”:”

When tax-filing season rolls around, many Americans are excited to submit their returns to the IRS. That’s because it is common for taxpayers to get a big refund deposited into their bank account or sent via check.

Taxpayers may be excited to find that, on the whole, these refunds are generally trending a little bigger this year than in 2023.

Here’s what most people are getting back, along with some advice on what to do with your own tax refund if the IRS sends you one.

Here’s what the average tax refund looks like for the 2024 filing season (so far)

The IRS regularly provides tax season updates, and is doing so during the 2024 filing season (which is going on now, and involves paying taxes on income earned in 2023).

According to the update issued ​​Feb. 23, 2024, which compares this year’s data to last year’s data, it’s clear that the typical tax filer is getting a larger sum of money refunded to them this year than they did last year.

Specifically, the average tax refund as of the most recent report was $3,213 as of late-February, up from $3,079 during the same time period in the 2023 filing season. This reflects a 4.3% year-over-year increase in the money the IRS must return to taxpayers when they file returns. It also means that the IRS has sent out a total of almost $93 billion in refunds to those who overpaid their taxes during the 2023 year.

These larger refunds may be explained, at least in part, by the fact that the IRS changed both the tax brackets and the standard deduction this year to ensure they kept pace with inflation. (Don’t worry, tax software has been updated to reflect these changes so there’s no additional math for you to do.) With tax brackets changing and taxpayers now required to earn more money before they move up into a higher bracket, many people will end up being taxed at a lower marginal rate.

Furthermore, with a higher standard deduction, people will be able to reduce their taxable income by a larger amount — thus leaving them with a smaller bill since they aren’t paying tax on as much of their earnings.

What should you do with your tax refund?

If you are one of the many getting a big tax refund, you’ll want to use it wisely. Usually, this means doing something that can help you reach your meaningful personal finance goals.

For example:

You might use your refund to finally finish building the emergency fund you’ve been dreaming of, for peace of mind.You may decide to pay off credit card debt.You may decide to invest your refunded money.

The important thing is to consider where the refunded money can best serve you and to send it there, rather than just spending it. For most people, getting a few thousand dollars at once isn’t a common occurrence and it really makes sense to make the most of it and use it to accomplish something bigger.

For the 2024 tax year, the best thing to do with your refund would be to not get one at all. A refund means you overpaid the IRS, essentially giving them an interest-free loan for no reason. You can adjust your withholdings next year, essentially telling your employer to take less out of each paycheck. This move will make sure this doesn’t happen again and a large refund won’t be in the cards — instead, you can have your money to enjoy for yourself all year long.

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There’s no need to clip coupons for Costco — they won’t be accepted. Here’s why. [[{“value”:”

It’s common practice for supermarkets to send out a weekly circular with coupons attached. If you’re lucky, you may not have to clip a physical coupon because you’ll be given the option to load a digital one to your store card instead. Either way, remembering those coupons is a good way to save money on groceries.

Costco works differently, though. If you’re a member, you may have noticed that Costco does not issue coupons for the items it sells. It also doesn’t accept manufacturer coupons for the items it carries. But there’s a reason for that.

A totally different business model

The reason Costco doesn’t accept or issue coupons boils down to the fact that its business model is different from that of traditional retailers. Costco charges members an annual fee. Currently, that fee amounts to $60 a year for a basic membership or $120 a year for an Executive membership that comes with 2% cash back on your purchases.

Because Costco derives so much revenue from membership fees, it’s able to use that revenue to offset its cost of procuring inventory. Costco also negotiates with its suppliers to source great deals for its members.

As such, the warehouse club giant is able to offer consistently low prices on the goods it carries. Since Costco is confident in the prices it offers, it doesn’t feel the need to accept coupons that might further reduce the price because customers are already getting a great deal to begin with.

Plus, Costco discounts its inventory on a rotating basis. It usually informs customers of sales in the form of a monthly mailer.

You may find that your go-to laundry detergent is available for $3.50 off of its usual price one month, while your favorite cereal is $4 off the next month. But as a Costco member, you’re just plain entitled to those discounts. You don’t need to clip or present coupons to enjoy those savings.

A practice Costco members really shouldn’t complain about

As a Costco member (or would-be member), you may find it annoying that the chain won’t accept coupons. But as Costco puts it, manufacturers often incorporate the cost of a coupon into the original pricing of their products they sell. Costco says, “Because it ultimately doesn’t provide any advantage to the member, we don’t permit our vendors or buyers to carry out that practice at Costco.”

To put it another way, a given manufacturer might put out a coupon that most retailers accept, offering $5 off a given item. But what that manufacturer might then do is make the original price of the item $35 instead of $30. In that case, it might seem like your coupon is saving you money when it’s not.

Costco, on the other hand, might only charge $25 for that same item. So while you can’t use your $5 off coupon, you’re still coming out ahead financially at the end of the day.

One really nice thing about Costco is that it’s very transparent about its pricing and business model. Costco doesn’t hide the fact that it doesn’t accept coupons — it boldly explains why it doesn’t have to. And as a member, that’s a practice you should try to appreciate.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.

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You might think it’s a bad thing to invest when stock prices are up. Read on to see why it’s not. [[{“value”:”

Money you might need for near-term goals or unplanned expenses should sit in a savings account. On the other hand, when you’re working toward a long-term goal, like retirement, it’s generally best to invest your money so it can potentially grow into a larger sum over time.

Now, you may have heard that when it comes to buying stocks, it’s best to add shares to your portfolio when their price is down and then aim to sell when their price is up — in other words, buy low and sell high.

It’s good advice in theory. But it’s also advice that’s really hard to follow. And trying to follow it might hurt you in the long run.

It’s not a good idea to time the market

The stock market, as measured by the S&P 500 index, is up about 9% year to date as of this writing. Because of this, you may be inclined to sit out the market for a while and wait for things to cool off.

Here’s the problem with that approach, though. We don’t know when or if things will cool off. Granted, it’s likely that at some point, stock values will drop to at least some degree from where they are today. But we don’t know when.

Also, there’s a good chance that years from now, the S&P 500’s value will be considerably higher than its current value. So by not investing today because the market is up, you might lose out on the chance to grow your money into a larger sum.

Over the past 50 years, the stock market has averaged an annual 10% return as measured by the S&P 500. Let’s say you sit out the market this year and wait for next year to put $30,000 you have on hand to work in a brokerage account. If that gives you 19 years until retirement, you’ll end up with about $183,500, assuming a 10% annual return in your portfolio.

But if you give yourself 20 years to earn a 10% return on your $30,000, you’ll be looking at almost $202,000. So all told, in this example, sitting out the market for a single year might cost you over $18,000.

Aim to invest on a steady schedule

Trying to time the market can mean losing out on the chance to make money on your money. So don’t worry about whether you’re investing when stock values are high versus low. Instead, remind yourself that stock values have a tendency to rise over long periods. So if you have a longer window to work with, the time to start investing is now.

What’s more, a good bet is to aim to invest a preset sum on a regular basis, whether by making monthly IRA or 401(k) contributions or by putting money into a taxable brokerage account. Remember, the value of your investments might fluctuate from one month to the next, or from one year to the next. But none of that truly matters in the long run.

What matters is the amount of money you end up with at the end of the day. And if you want to end up with more money than less, your best bet is to start investing as soon as you have the means to do so — regardless of where stock values sit.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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Tax season can be confusing for a lot of people. But calling the IRS with a question can result in waiting on hold. Keep reading to learn what to do instead. [[{“value”:”

Recently, the IRS warned that phone delays should be anticipated during the run-up to the tax-filing deadline for submitting 2023 tax returns. In response to the fact so many taxpayers call for help with their taxes at this time of year, the agency suggested an alternative if you need customer support.

Here’s what the IRS wants you to do instead of calling.

Take advantage of these resources if you need assistance

The IRS has advised that you take advantage of online support and resources as much as possible, rather than trying to call the agency.

“We’ve worked hard to provide better taxpayer service for people this filing season with more options to reach the IRS in convenient ways,” IRS Commissioner Danny Werfel said. “We want taxpayers to have access to the help they need around the clock. IRS.gov’s expanded tools and information make that easier for taxpayers, especially during this peak period for IRS phone lines.”

The IRS listed a number of different tools that are all designed to help make filing your tax return easier — and that you can take advantage of to get answers without having to call customer service and potentially get stuck on hold for a long time. Some of these tools include:

The Where’s My Refund tool to track money you’re getting back. This will help you determine when to expect an IRS deposit into your bank account.Your personalized online account, where you can access past tax records, make and schedule payments, and validate and save bank accounts.The Interactive Tax Assistant that can provide answers to common questions specific to your circumstances. These might include whether you’re eligible to file a tax return, what your filing status should be, or whether someone qualifies as a dependent.A Tax Withholding Estimator tool that helps you to calculate how much tax should be taken out of your paycheck by your employer.An Earned Income Tax Credit Assistant that can help you to determine if you are eligible to claim the Earned Income Tax Credit (EITC) and to estimate the amount that you might receive if you are.

By using these supports, you can get IRS help with tax issues that you might be facing, without having to spend a long time on hold trying to get someone to offer personalized answers. There are also guides to what you can do with specific tax forms, like the Form 1099-K, that you can consult if you receive these documents and don’t know what they mean.

See if you’re eligible for this tax support

The IRS also urges taxpayers to take advantage of free tax prep help if they are eligible for it and need an extra hand.

This includes the Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs, which assist elderly individuals, low income and disabled individuals, and non-English speakers with completing their tax forms.

Taking the IRS advice to use these free resources can save you a lot of hassle, so give them a try if you have a tax issue you need help addressing.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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