Most Americans do not expect their tax refunds to last long.
In fact, 1in 3 taxpayers plan to spend their refunds immediately, a new survey from tax preparation company Jackson Hewitt found. The company surveyed 1,000 American adults in March 2022.
Another 22% of Americans plan to spend their refund within three to six months, while 23% plan to save it until they “need it most during the year.” The rest of the respondents surveyed do not expect to receive a refund.
The average tax refund issued so far this tax season is $ 3,263, according to IRS data.
But Americans aren’t planning to spend their refunds on electronics and dinners out: 31% of respondents said that theirs will go toward major bills, including rent, medical bills, debt and utilities. And 15% said they will spend their refunds on “essentials,” such as gas and groceries.
Only 5% of taxpayers surveyed said they planned to spend their tax refund on entertainment expenses such as vacations and concerts, while 2% said they would put it toward a major life event such as a wedding or home purchase.
That Americans are planning to spend their refunds on essentials is nothing new, says Mark Steber, Jackson Hewitt’s chief tax information officer. “Big refunds are a good thing for many millions of Americans because they take them and they spend them wisely,” he tells CNBC Make It. “They’re not spending it in Vegas or having a big pub crawl.”
Still, Steber encourages taxpayers receiving refunds to treat themselves with 10% of it, if they can afford it. “Do something frivolous,” he says. “Buy yourself a big TV or take that family trip.”
But whatever you do, do not wait to send in your return. The penalty for not filing your taxes by April 18 is 5% of your unpaid taxes for each month that the return is late, maxing out at 25%. You could also rack up 0.5% in penalties each month unless you pay an estimated amount by Tax Day.
Taxpayers have the option to file for an extension, which will give them an extra six months to get their returns in by October 17th.
Sign up now: Get smarter about your money and career with our weekly newsletter
Do not miss: Get your tax refund faster by avoiding these 6 commonly overlooked mistakes