Use economic stimulus payment to improve finances

Many people are anxiously waiting for their economic stimulus payment. More than 130 million households will begin receiving their payments this month. The amount people will receive depends on the information contained in their tax returns.

The Internal Revenue Service (IRS) has a plan to issue the payments based on the last two digits of Social Security numbers. Persons expecting a tax refund who requested it be direct deposited into their bank account will also receive their economic stimulus payment by direct deposit. Those whose tax refund was mailed will receive their stimulus payment by mail.

For direct deposits, payment dates are from May 2 through May 16. Paper check payments will be issued May 16 through July 11.

People who file a return after April 15 will receive their economic stimulus payment, but probably a couple weeks later than the scheduled date. A small percentage of tax returns will require additional time to process and to compute a payment amount. For those returns, stimulus payments may not be issued on schedule, even if the tax return was processed by April 15.

Several scams related to the payments have already shown up. If someone claiming to be from the IRS calls or e-mails claiming that the IRS needs a Social Security Number, bank account or credit card number to complete the processing of a stimulus payment, it's a scam. The IRS already knows your Social Security Number and your bank account if your tax refund is being direct deposited. You do not have to do anything more than file a tax return to receive the stimulus payment. The IRS will not contact you by phone or e-mail to ask for personal information. Never give out your personal information to anyone who calls or emails you. The scammers are trying to get your personal and financial information so they can empty your bank account, run up charges on your credit card, or apply for loans, credit cards, or benefits in your name, or commit other crimes.

It would be easy to spend the payment on something fun, but before going on a shopping spree, think about ways to use the money to improve your family's financial situation. Here are some options you may want to consider.

Put the money towards a loan payment. Make an extra payment on your mortgage, auto loan, student loan, or credit card balance. The faster you pay off your debts, the less interest you will pay.

Put the money into savings. Consider making a deposit to your IRA or other retirement savings. Most taxpayers with children will receive $300 per child. That amount could be used to open a savings account for the child to start a college fund.

Be prepared for special occasions such as birthday and Christmas. Put some money aside in a savings account to be used for gifts later in the year.

Whether you decide to spend or save your money, remember the key to budgeting is moderation. It's okay to treat yourself, but you will likely thank yourself later if you take care of responsibilities first.

For more information on the economic stimulus payment and a payment schedule based on Social Security numbers, go to the IRS website at http://www.irs.gov and click on Stimulus Payment.

Editor's Note: Ann Ludlum is a K-State Research and Extension family and consumer sciences and 4-H extension agent assigned to Bourbon County. She may be reached at (620) 223-3720.