Rebate spenders appear reticent

Last week, I wrote about the most tax procrastinating cities in the United States. Texas and California are prime do-then-later states, an approach that's generally not a wise one to take.

Putting off filing means you likely will be a bit harried if you do try to finish your forms by April 15. And, as we've all found out at one time or another, haste does indeed  often make waste.

If you delay too long, you might even end up prolonging your tax headaches by getting an extension to file. Sure, that gives you more time to fill out the forms, but you still have to pay any taxes you owe (or a close approximation of the due amount). Plus, it just means you'll end up worrying about your taxes that much longer.

And this year procrastination has an added cost. You won't get your stimulus package payment, popularly referred to as a tax rebate, until the IRS processes your return.

No special plans: Of course, some people might not be so worried about getting that money because they don't have any special plans for it. While a lot of folks over withhold just to create an annual tax refund that they can spend for fun things like upcoming summer vacations, a major tax preparation firm says most folks have no such plans for their rebate checks.

More that 65 percent of taxpayers surveyed last month by H&R Block said they plan to use their rebates to pay bills or buy necessities like food.

In fact, reports Block, almost the same number of respondents to the online survey said that's how they plan to use their regular refunds this year, too. Apparently, widespread worries about the economy and how it could adversely affect individuals played into the survey, which was conducted during the latest wave of bad financial news and warnings on how long it might take for the tide to turn.

Here's the breakout for rebate spending plans:

• 45 percent will pay bills
• 21 percent will purchase necessary goods or services, such as groceries or car repairs
• 18 percent will put it into investments
• 16 percent will splurge, for example, on jewelry, electronics or a vacation.

And here's what folks told Block they will do with their regular refunds;

• 45 percent will pay bills (deja vu!)
• 17 percent will purchase necessities
• 15 percent will invest it
• 7 percent will indulge themselves.

Use it elsewhere: H&R Block's survey also revealed some taxpayer ambivalence about the rebate plan itself.

More than 40 percent of respondents indicated they'd prefer the government use the $168 billion allocated for the economic stimulus program elsewhere, such as reducing the national debt (37 percent), improving health care services (32 percent), shoring up Social Security (17 percent), or improving education (15 percent).

Do your rebate and refund attitudes jibe with the H&R Block survey findings? Let us know what you think about the rebate plan and what you plan to do with any money you might get back this year from Uncle Sam.

Comments

[Dan Ray]

Hey, Kay, thought you might enjoy this AP story (via MSN): http://www.msnbc.msn.com/id/24164041/.
It says Krogers and Sears are trying to prod people into turning their "stimulus" checks into gift cards. Let Kroger's sink its hooks into the whole $300, for example, and they'll give you a gift card of $330.

[Kate]

I thought you might like to look at this-
http://www.heritage.org/research/features/budgetchartbook/index.html
Its a federal revenue and spending book of charts. It shows how much each income level pays in taxes, how much we pay compared to years prior, etc.

[Steve Austin]

I've seen a lot of blog and news pieces about surveys regarding *where* taxpayers will spend their rebate check. Seems to me that this is largely a useless survey; I don't see what meaning it has to ask someone where they will spend some money. Money is fungible.

Paying bills and buying necessities doesn't cut it as an answer for most people. Most people pay their bills and buy necessities, right? Only the truly strapped taxpayers who cannot now afford paying all their bills will actually apply their stimulation check to bills and other necessities. I say most people because I well realize that many people in the US do struggle with basic personal financial obligations, but then again, do those people really have time to answer surveys like this? I'll bet they are out working rather than yapping with us all about what they are going to do with an extra $300 or $600. Anyone like to speculate on how many readers of DMWT don't pay for all their bills and necessities anyway? (My wager is 0 people.)

In my view, only the 20-30% of survey respondent--who have said they will invest or splurge--have given legitimate answers to the survey question. Those are valid destinations for marginal funds.

The real question is/should be: "what will you do with $300 (or 600) that you would not do if you didn't have it?"