What might consumers do with both a tax refund and pandemic relief money?
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For those expecting a tax refund this year, it may end up coming around the same time as another pandemic relief check.
The House is set vote Tuesday on the $1.9 trillion COVID relief package that the Senate passed over the weekend. The impending arrival of tax refunds and that relief money could be significant for consumer spending and the economy.
Nearly three-quarters of people who get a tax refund say it’s important to their finances, according to a new survey from CreditCards.com — low-income people in particular.
“For low-income families, tax refunds can be the biggest single cash inflow of the year,” said Rob Levy with the nonprofit Financial Health Network. He said many people plan how they’re going to spend their tax refund before they get it.
“In many cases, they are using it to pay down debt that they may have incurred,” Levy said. “Or they may use that money to pay for things that they have pushed off.”
Or, they might build up savings. Many people used the first round of pandemic relief checks in similar ways, said Ted Rossman, industry analyst at CreditCards.com.
“What we saw with the initial round of stimulus was a lot of savings and debt payoff,” Rossman said.
But, he said, retail sales popped in January when the second round of checks went out.
“I think we’re starting to see more of this pent-up demand unleashed on retail spending,” Rossman said.
And he said there will likely be more of that with the next expected round of relief checks and tax refunds.
COVID-19 Economy FAQs
What do I need to know about tax season this year?
Glad you asked! We have a whole separate FAQ section on that. Some quick hits: The deadline has been extended from April 15 to May 17 for individuals. Also, millions of people received unemployment benefits in 2020 — up to $10,200 of which will now be tax-free for those with an adjusted gross income of less than $150,000. And, for those who filed before the American Rescue Plan passed, simply put, you do not need to file an amended return at the moment. Find answers to the rest of your questions here.
How long will it be until the economy is back to normal?
It feels like things are getting better, more and more people getting vaccinated, more businesses opening, but we’re not entirely out of the woods. To illustrate: two recent pieces of news from the Centers for Disease Control. Item 1: The CDC is extending its tenant eviction moratorium to June 30. Item 2: The cruise industry didn’t get what it wanted — restrictions on sailing from U.S. ports will stay in place until November. Very different issues with different stakes, but both point to the fact that the CDC thinks we still have a ways to go before the pandemic is over, according to Dr. Philip Landrigan, who used to work at the CDC and now teaches at Boston College.
How are those COVID relief payments affecting consumers?
Payments started going out within days of President Joe Biden signing the American Rescue Plan, and that’s been a big shot in the arm for consumers, said John Leer at Morning Consult, which polls Americans every day. “Consumer confidence is really on a tear. They are growing more confident at a faster rate than they have following the prior two stimulus packages.” Leer said this time around the checks are bigger and they’re getting out faster. Now, rising confidence is likely to spark more consumer spending. But Lisa Rowan at Forbes Advisor said it’s not clear how much or how fast.
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