And this year, many filers will also be receiving economic stimulus checks from the government in the form of a tax rebate.
What should we do with the money?
Janice Revell, a senior writer of Money magazine, had some words to the wise on The Early Show Friday, in part two of our three-part tax series as the Tuesday deadline approaches.
Some 77 percent of tax filers receive a refund. The average amount received this year for last was $2,225.
But, says Revell, "You're usually better off not getting a refund. That's because the money you get back as a refund is money that could have been in your pocket throughout the past year. By waiting to get a refund, you essentially loaned your hard-earned money to Uncle Sam, interest-free.
"Instead of getting a refund, it would be far better to have that money in your take-home pay every month, where you can use it to pay down credit-cards or other debts, fund your 401(K) plan at work, or just pay your day-to-day bills."
Revell points out that, if you receive the average-size refund, it amounts to almost $200 a month extra that you could have had show up in your paychecks. That's a lot of money, particularly when everyday necessities such as gas and food are costing more and more.
She says that, if your tax refund is more than $500, you're having too much tax withheld from your paycheck. That's when you know you need to call your HR department and ask for a new W-4 form to have more taken out.
This year, tax payers will also be receiving an economic stimulus check from the federal government. Filing a tax return is what enables you to receive the check. If you don't file a return, you won't get the rebate.
Here's what you can expect to get:
If you exceed these income levels, your rebate will be less. If you have a six-figure income, you likely won't receive anything at all.
"Also, if you owe any back-taxes, or if you are delinquent on student loans or child support payments, the IRS will reduce your rebate by any amounts that you owe," Janice points Revell notes.
Of course the next thing people want to know is what's the fastest way to get their hands on this money?!
Whatever you do, Revell says, stay away from refund anticipation loans! "What these loans do is give you an immediate cash advance on your tax refund," she explains. "But they come with sky-high interest rates and fees -- much worse, usually, than what you'll pay on even the highest-interest-rate credit cards. And you're paying those fees to borrow your own money!"