At this point in March, the clock is usually ticking on tax season but with the potential for a broad extension due to coronavirus, everyone could have more time to file and decide what they will do with their returns.
The IRS has not yet decided if the filing deadline will be extended, but CivicScience data show half of U.S. adults are in favor of an extension.
Taxes will need to be filed at some point, whether it is April 15th or later, so CivicScience’s yearly tracker looked at how people plan to spend their tax refunds in 2020, what kind of tax software leads this year, and other fun tax facts.
Tax Refunds 101
First of all, who gets tax refunds? The data show that 31% of people surveyed are probably not receiving a tax refund, half of whom are employed.
In fact, the more you make, the less likely you are to receive a tax refund, with the highest earners being disproportionately affected. (The data does not include self-employed individuals, only full-time and part-time employees).
Pay Off Debt and Save Money
When it comes to those who do anticipate a refund, a recent survey of 3,542 U.S. adults reveals that results don’t vary much from 2019. Ultimately, Americans want to use their refunds to pay off debt and save money.
Debt is still the number one priority – about one-third of those who will receive a refund plan to pay off debt with their refund. Women are 15% more likely than men to choose this option, while men are more likely to say they will invest the money.
Paying off debt ranks highest among Gen X, Millennials, and Gen Z, but not Baby Boomers.
Saving the refund comes in second, and ranks highest among Boomers and Gen Z. While Gen Z shows itself to be proactive and plan to save their tax refund (and invest it, too), they also have less debt than the Gen X and Millennial generations. Less debt means more savings and investment opportunities.
Credit Card Debt Impacts Refund Spending
Considering that credit card debt is growing, it’s not surprising that so many Americans would put their tax refund towards debt.
In fact, 42% of people with credit card debt plan to use their refund to pay off debt.
Debt doesn’t discriminate when it comes to income. It affects earners at all income brackets and makes it difficult to save or invest, or invest in home improvements. The data show that those with credit card debt are less likely to do those things (note, CivicScience estimates that 44% of Americans are carrying credit card debt).
Tax Software? TurboTax Leads this Season
Despite the negative press last year suggesting that TurboTax made it difficult for customers to find the version of their free tax filing software online, TurboTax still ranks highest among preferred tax software (as it did in last year’s survey.) At 36%, it’s three times more popular than the next runner up, H&R Block.
However, the “other” category saw a 32% increase from 2019.
Forty-seven percent of U.S. adults still need to file their taxes, and 13% of adults anticipate their return being higher this year. Once returns are in the hands – and bank accounts – of their recipients, CivicScience will check back in to see if intent to save, spend, and pay off debt matches reality.