Tax Refunds: To Spend or Not to Spend?

The Internal Revenue Service (IRS) began collecting e-filed tax returns last week, and with signs of an improving economy, consumers and retailers alike are anxiously awaiting the arrival of 2011 tax returns. In 2010, the average person received a tax refund of about $3,003, pumping $328 Billion dollars (IRS Filing Season Statistics) into American pockets--that’s no small chunk of change. Not surprisingly, consumers are already planning how to spend that extra money.















Despite the lingering issue of unemployment nationwide, The University of Michigan Consumer Sentiment Index rang in at 77.5 this month--the highest level of consumer comfort we have seen since January 2008. This is a clear indication that consumers are aware the economy is improving, but it’s likely they have not forgotten the financial lessons learned over the past two years. So how will 2011 refund recipients spend their big returns?

According to a survey conducted by the National Retail Federation (NRF) this month, 66.2% of Americans are expecting a return this year (up from 65.5% last year). While many intend to use tax refunds to dutifully measure out debt payments and savings (42%), others will retire their penny-pinching ways to treat themselves with an exciting new purchase. In fact, 13.2% of those surveyed plan to purchase a big-ticket item, such as a car, television, or new furniture; and 11.9% will cash in on a spring/summer vacation.

“Despite the difficult unemployment situation across the country, Americans receiving a tax refund this year seem eager to plough this money back into the economy,” said NRF President and CEO Matthew Shay. “With sales momentum continuing to build, NRF is becoming more bullish about the economic recovery.”

For retailers, it’s an important time to stay top-of-mind as consumers research their many spending options. This year, 40.4% of consumers have already filed their taxes (NRF). A strong presence while consumers are thinking about their big returns over the next two months, anxiously searching for “tax return status” could lead to a bigger chunk of the $328 Billion dollar pot for your company this year.

If you’re one of the many expecting a big tax return in 2011, how will you spend it?


Posted by Jacalyn Stolt, The Google Retail Team