Nicolet law office
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Nicolet Law managing attorney Russell Nicolet

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SERVING WI & MN | Calls Answered 24/7 | Free Consultations 866-663-8774

Are You Using Tax Refunds as a Savings Plan?

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Are You Using Tax Refunds as a Savings Plan?

Woman adding up stacks of coins from her tax refund and putting them into savings

Financial advisors have long preached that receiving a tax refund simply means that the taxpayer has provided an interest-free loan to the government, and that you could instead be earning 2.25% on a 12-month T-bill investment. Yet 65% of U.S. taxpayers say that they would rather have a lump sum refund than keep more money each pay period during the year (according to a JP Morgan Chase Bank study). The Federal Reserve Board states that 40% of American households cannot accumulate $400 in a financial emergency, and the average $3,600 in tax refunds represent 2.5% of the U.S. GDP. The refunds are an average of six weeks of pay.

The rise of do-it-yourself tax preparation software means that fewer people are connecting with a tax professional or financial advisor, who otherwise may be able to suggest changes to the W-4 withholding forms or educate people on the advantages of alternative savings programs.

How can Americans reduce their use of tax refunds as their de facto savings plan?

John Pitts, a former Deputy Assistant Director for Intergovernmental Affairs at the Consumer Financial Protection Bureau has some ideas from his April 2019 commentary found here: https://fin.plaid.com/articles/tax-refunds/

Pitts suggests a few ways to reduce using tax refunds as lump sum savings plans, which include:

  1. Spare change apps which round up to the dollar on purchases and places the difference in an interest-bearing account or investment.
  2. Employers could withhold after-tax contributions to a money market account.
  3. Congress could require the IRS to change the W-4 to allow withholding into a Treasury Inflation-Protected Security, which earns interest on the funds throughout the year.

Many people use high interest loans and credit cards to make ends meet during the year, and then receive a large lump sum tax refund in February. This refund is then used to purchase delayed needs items, such as clothing or home repairs. This exacerbates the problem by combining an interest-free loan to the government while paying high interest on short-term borrowing. Because of changes to the tax code and the IRS use of more accurate W-4 withholding forms, wage earning Americans can expect to see smaller tax refunds in 2020 and beyond. If we are unaware of these changes and are not seeking alternative savings plans, many people will find themselves without the large tax refunds upon which they’ve come to rely.

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Nicolet Law Office is honored to have been nominated for numerous awards for excellence in service and client satisfaction. Our attorneys have appeared in such prestigious lists as Top 40 Under 40 and Rising Stars. While we’re thankful to have the support of industry peers and independent third-party organizations, nothing beats the feeling of gratitude we share with clients when we can make a positive impact on their lives.

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Contact us today to request a free case evaluation with a dedicated local attorney. With twelve convenient office locations throughout Minnesota and Wisconsin, accessing award-winning legal services has never been easier. If you have a medical condition that prevents you from traveling, we would be happy to meet you at your home or schedule a private virtual consultation.

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SEE HOW NICOLET LAW MAKES A DIFFERENCE IN OUR CLIENTS’ CASES

CAR ACCIDENT

Offer before Nicolet Law
$50,000.00

CAR ACCIDENT

Result with Nicolet Law 
$1,200,000.00

SEMI-TRUCK ACCIDENT

Offer before Nicolet Law
$75,000.00

SEMI-TRUCK ACCIDENT

Result with Nicolet Law 
$700,000.00

SLIP AND FALL ACCIDENT

Offer before Nicolet Law
$5,000.00

SLIP AND FALL ACCIDENT

Result with Nicolet Law 
$180,000.00

SLIP AND FALL ACCIDENT

Offer before Nicolet Law
$0.00 - denial

SLIP AND FALL ACCIDENT

Result with Nicolet Law 
$159,000.00

DRUNK DRIVING VICTIM

Offer before Nicolet Law
$0.00

DRUNK DRIVING ACCIDENT

Result with Nicolet Law 
$815,000.00

UTV ACCIDENT

Offer before Nicolet Law
$5,000.00

UTV ACCIDENT

Result with Nicolet Law 
$250,000.00
(click to view results)

12 locations in Wisconsin and Minnesota to serve you

Wisconsin State Icon

Wisconsin Locations:

EAU CLAIRE:

402 Graham Ave.
Suite 305
Eau Claire, WI 54701

Phone: 715-226-4155
Map & Directions

HUDSON:

517 2nd Street
Unit #205
Hudson, WI 54016

Phone: 715-226-4155
Map & Directions

LA CROSSE:

119 N 19th St S
La Crosse, WI 54601

Phone: 715-226-4155
Map & Directions

NEW RICHMOND:

1500 Madison Ave.
Suite 220
New Richmond, WI 54017

Phone: 715-226-4155
Map & Directions

RICE LAKE:
337 North Main Street
Rice Lake, WI 54868

Phone: 715-226-4155
Map & Directions

RIVER FALLS
215 S 2nd St #20
River Falls, WI 54022

Phone: 715-226-4155
Map & Directions

SUPERIOR:
1200 Tower Ave.
Superior, WI 54880

Phone: 715-226-4155
Map & Directions

WAUSAU:
408 3rd Street
Suite 303
Wausau, WI 54403

Phone: 715-226-4155
Map & Directions

Minnesota State Icon

Minnesota Locations:

DULUTH:
306 West Superior Street,
Suite 606 West
Duluth, MN 55802

Phone: 651-427-3331
Map & Directions

HIBBING:
Howard Court Bldg.
302 Howard Street, Suite 123
Hibbing, MN 55746

Phone: 651-427-3331
Map & Directions

MINNEAPOLIS:
225 South 6th Street
Suite 3900
Minneapolis, MN 55402

Phone: 651-427-3331
Map & Directions

WOODBURY:
724 Bielenberg Drive
Suite 126
Woodbury, MN 55125

Phone: 651-427-3331
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Wisconsin and Minnesota’s Local Award-Winning Injury and Disability Attorneys.
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