Following is some advice in deciding how to handle a windfall of income.
April and May are the months where taxpayers begin dreaming about their refunds. The average federal tax refund in recent years has been around $3,000, according to the Internal Revenue Service. Whether it’s a nice size refund, an inheritance, a bonus, or large winnings as a professional athlete, there are many windfalls that can suddenly change your financial situation. The New Jersey Society of CPAs has some smart tips for people who want to get the greatest benefit from a cash jackpot.
Getting a hefty check in the mail is exciting, and your first impulse may be to treat yourself with a big splurge. Before you do, CPAs and advisors recommend depositing the check in the bank and giving yourself a cooling off period. You’ll be better able to make a good decision when you’ve had a chance to get some perspective. You may ultimately decide that splurging just a little is a better decision and one you’ll be less likely to regret later. Consider limiting any splurges by buying a prepaid debit card that you can use for impulse spending.
Your CPA and financial advisor can help you understand any tax implications of your good fortune, as well as help you create a plan to make the most of your windfall. Whether you win the lottery, receive an expected or unexpected family inheritance, or simply have questions about your day-to-day finances, your local CPA can help.
© 2017 Money Matters are provided by the American Institute of Certified Public Accountants.
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