Taxpayers are most likely to put this year’s refunds into savings or use it for day-to-day expenses like food, gas or housing in response to lower paychecks because of higher payroll taxes, according to a survey reported this month by the American Institute of Certified Public Accountants.
The telephone survey of 1,011 U.S. adults in March found that 43 percent of those who expect to get a refund view it as more important to their financial situation this year than in past years. According to the report, conducted for the institute by Harris Interactive, 46 percent expect to save the money, 37 percent will use it for routine expenses, and one-third will pay down debt.
“Last year, the IRS sent checks totaling nearly $310 billion to taxpayers, underscoring the significance of tax time to American households,” said Ernie Almonte, chairman of the institute’s National CPA Financial Literacy Commission. “This year, in the wake of a paycheck squeeze, many Americans are counting on those refunds for relief – a way to bolster savings or shore up budgets.”
The expiration of a payroll tax cut in January meant that the Social Security withholding rate returned to 6.2 percent from 4.2 percent. More than 70 percent of workers have felt at least some impact, according to the survey, and 96 percent have adjusted accordingly.
Specifically, 70 percent are saving less in emergency funds, 51 percent are skimping on cable and digital entertainment, 45 percent are socking less away for retirement, and 17 percent are skipping credit card, utility, rent or mortgage payments.