Recent data indicates that as much as 9% of taxpayers plan to use their tax refund this year for large purchases, such as a vehicle or home. Up to 14% of millennials plan to use their tax refund for big-ticket items according to Santander Bank. A recent eBay survey found around 37% of millennials plan to use their tax refund for a car purchase.
Jonathan Smoke, chief economist for Cox Automotive, says additional federal stimulus money, focus on infrastructure spending, and organic economic improvements as vaccine rollouts intensify will result in economic growth that is “expected to be larger in 2021 than otherwise would’ve happened.”
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Under normal circumstances, the IRS usually begins the tax season in late January. The IRS is expected to open the tax season on February 12th, which is later than the typical start date of the tax season. The agency is urging taxpayers to file their returns electronically this year to expedite the processing of tax returns.
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BHPH customers typically have little in the way of savings, and when they receive a federal stimulus payment, consumers with the least liquidity (lowest savings rates) tend to be more likely to spend. If they need a product, such as a vehicle, or a service, such as a vehicle repair, they are likely to use that money quickly.
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Under the Cares Act, the end of the period of applicability for the Pandemic Unemployment Assistance ($300 weekly extra unemployment benefits) program extends to those weeks of unemployment ending on or before March 14, 2021. It is likely a new stimulus bill will extend those benefits beyond mid-March.
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Mark Luscombe, principal analyst for Wolters Kluwer Tax & Accounting, noted that Feb. 12 is the latest date in many years for the IRS to begin processing tax returns. It will take about 21 days for refunds to be sent to consumers, pushing them to the first full week of March.
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