How to make your tax refund work for you

If you’re eagerly anticipating a tax refund in the coming weeks, you have good reason to be optimistic: The IRS reports that about 77% of tax returns filed last year generated a refund, and the average refund was $2,815.

Although what may appear to be a gift from the government is actually a delayed receipt of your own money, the best use of those funds is not always obvious. This year, the question is even more complicated, as many households face mounting financial pressure from inflation, rising interest rates and the expiration of government assistance programs linked to the pandemic. Advance child tax credits, for example, which offered families monthly checks based on their income and number of dependents, have ended pending further action from Congress.

FILE - A box full of dollar bills is pictured in New York, Wednesday, April 3, 2019. Although your tax refund may look like a gift from the government, the best use of those funds isn't always apparent.  (AP Photo/Mark Lennihan, File)

“For many people, advance child tax credits have become part of their budget, so you should consider saving your tax refund and using it to supplement your monthly budget in the future,” says Tommy Blackburn, a certified financial planner at Newport News, Virginia. . “That can help with monthly cash flow,” he adds.

Another option is to adjust your withholding to each paycheck so you don’t pay more tax than you need to. But, Blackburn adds, some people prefer to receive a lump sum each year as a method of forced savings.

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