ORLANDO, Fla. – This week was the IRS deadline to file taxes for most Americans, but Floridians have an automatic extension until May 1, 2025, due to Hurricane Milton.
The IRS says almost 68 million Americans have already received refunds on average of $3,100.
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Earlier this week, News 6 anchor Lisa Bell spoke with CBS News Business Analyst Jill Schlesinger to see what you should do if you get a refund from the IRS.
Schlesinger said getting a refund is not a good idea.
“I know everybody loves that found money but that money, that $3,100 check, that is just the return of an interest-free loan you gave Uncle Sam for a whole year. That’s why I think it’s a pretty lousy deal. Let’s not do it again.”
You can go to IRS.gov and use the withholding estimator tool to pinpoint how you can adjust your withholding with your employer. If you’re self-employed, you may want to reduce your quarterly tax payments.
But if you do get a refund, here is what Schlesinger suggests you make an emergency reserve fund.
"You want to have an emergency reserve fund that can cover you for six to 12 months of your living expenses. I know that’s a lot of money, so we’re talking aspirational here. But if you’re retired, I would even make that a bigger number, one to two years of your living expense, because when you’re not making money when you have these big changes in your life, it can really be alarming," she said.
You should also use the refund to reduce your credit card or other high-interest debt.
And if you can, try to contribute to your retirement plan to the best of your ability.
“Especially if you’ve got a match from your employer. If you don’t have a plan through work, use a traditional or a Roth IRA,” she said.
When it comes to mortgage, Schlesinger said this goes in the category of “it gives you peace of mind, but it might not be the right decision.”
“This really hinges on what is the interest rate of your mortgage? A lot of Americans have low rates. In fact, 54% of homeowners have fixed loans that are 4% or lower. So, chances are, if you invested the money that you would use to pay down your loan, you might actually find higher returns over the same time horizon. OK, let’s say you hate markets, you hate investing. You say, ‘Jill, I’m never going to do that.’ OK, think of this. When you pay down your mortgage, you’ve lost access to your money. And you know what, as you get older, that access, that money, its liquidity can provide stability, and it could be necessary to fund health and medical needs. So don’t be in such a hurry to pay off the mortgage.”