Got a tax refund? Congrats! Here's what to do with it

What to do if you have not yet filed your taxes

Some taxpayers expecting refunds from Uncle Sam may have that money already spent on a vacation or shopping spree. But the windfall -- with refund checks this year averaging just under $2,900 -- would be better spent on less glamorous pursuits -- like paying off credit card debt or saving for a rainy day, said certified public accountant Dan Geltrude.

With Monday's April 15 deadline for filing taxes rapidly approaching, Geltrude said Americans should keep in mind that filing for an extension gives you more time to fill out the paperwork, but not more time to pay taxes. "The one thing not to do is not pay your taxes," he told CBSN. "You do not want to be taking, shall we say, a loan from the IRS."

As for those coveted refunds, Geltrude's advice is the nutritional equivalent of being told to eat your vegetables. "You want to make sure you have your refund working for you. The cardinal sin of personal finance is credit card debt, or high-interest rate debt, when you're talking about 14-18 percent potentially of interest that you could be paying," he said. "If you get a lump sum refund you should use that to get down that debt."

Whittling down or paying off your credit card balance will also improve your credit score. Aside from paying on time, the portion of your credit limit you're using is a huge factor in your score. Financial pros suggest getting the balance on each card to 30 percent of its limit or less. Of course, paying off every card every month is ideal.

Credit expert John Ulzheimer, who has worked for Equifax and FICO, recently told NerdWallet that a tax refund can help your credit score if you're able to pay "nuisance balances." That's his term for small balances on multiple cards that consumers often have left over from holiday or vacation spending.

Be prepared

The next thing on Geltrude's list: an emergency fund to guard against job loss or other personal economic downturns. Such a fund would ideally have enough to live on for six to nine months.

Lastly, the accountant recommends contributing to an IRA, noting that Americans can contribute $6,000 a year, with those 50 and over can contribute another $1,000. As he put it: "Retirement is coming for everyone. Set something aside."  

And, while getting a refund can be a joyful experience, it really means you just gave an interest-free loan to the government, according to Geltrude. The goal instead should be net zero, where your withholdings are adjusted so you neither get a refund nor owe Uncle Sam. Spend wisely!

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