As the popular Benjamin Franklin quote goes, "In this world nothing can be said to be certain, except death and taxes." Every year in America, as the calendar flips to January, we're reminded of the second inevitability.
The tax season hovers - a daunting, yet crucial phase that has far-reaching implications on our financial health.
Now, thanks to a recent survey from our friends on the Nextdoor Customer Insights and Analytics team, we can take a peek at America's sentiments, strategies, and worries as they grapple with their taxes.
Read on for more.
The 2024 study: Tax knowledge vs. stress
The survey, conducted on February 5th, 2024, involved 2,000 U.S. adults and provided valuable insights into Americans' outlook during tax season.
One of the major takeaways: It's clear that, despite most people having a good grasp of their taxes generally, there's still a noticeable craving for better understanding.
An impressive 64% admitted that tax season introduced a level of stress to their lives, reinforcing the need for improved financial literacy.
As a result, there’s an opportunity for thought-leaders, businesses, and financial advisors to step in, providing much-needed tax guidance services to their local communities.
Defying the procrastination stereotype
Interestingly, our data contradicts the stereotype of taxpayers scrambling for last-minute tax filing. 56% of adults in our poll plan to file their taxes early - in January or February.
Even more interesting: Most people opt to shoulder the tax-filing load themselves, with 26% relying primarily on free apps and software for tax preparation.
If anything, this stat emphasizes the digital age's central role in our financial tasks and the continuous need for tax software solutions that make it easy to file.
Placing refunds in the financial puzzle
One key insight uncovered in our study was the weighty importance of tax refunds in Americans' overall financial plans.
54% of respondents termed their refunds as 'crucial' to their financial situations. This finding dramatically underscores the need for financial planning services around refund management and investment possibilities.
As for what people will do with the money? Here’s the breakdown:
-
Put into savings - 24%
-
Everyday expenses - 24%
-
Pay down debt - 17%
-
Invest it - 12%
-
Home improvement - 8%*
-
Splurge purchase - 6%
-
Book a vacation - 5%
* One unique item to call out about our neighbors: Nextdoor users are 25% more likely to put their refund towards a home improvement project
The age difference in refund usage
When it comes to spending tax refunds, age proved a distinction.
Older Americans tended to squirrel away their refunds for a more extended period before spending, compared to younger generations.
Whether it's savings, covering daily expenses, or splurging on coveted items, these spending patterns highlight the varied needs and mindset of different demographics.
Those planning to splurge with their reclaimed tax refund have their eyes on:
-
Cars - 26%
-
Clothing - 24%
-
Electronics - 16%
-
Personal care - 11%
-
Entertainment - 11%
And they’ll likely spend it pretty fast too - nearly 2/3 of people expecting a refund will spend it all within a month of receiving it.
Money come, money go.
Shelf anxiety around Tax Season with actionable steps
As tax season rolls in, everyone from thought leaders to financial advisors and tax service businesses can play a pivotal role in easing the process.
Here’s a few starter ideas:
-
Educating on tax basics: Despite a good grasp of taxes, 64% of our respondents reported stress, indicating the need for clearer understanding. Thought-leaders and financial advisors can fill this gap by creating easy-to-digest tax educational content.
-
Providing tailored tax plan guidance: Given that 54% of respondents count on their tax refund as part of their overall financial picture, guided tax planning becomes vital. Financial advisors can assist clients in maximizing and smartly utilizing their expected refunds.
-
Facilitating self-filing: The early bird trend, with 56% planning to file in January or February, signals a demand for user-friendly tax software. Tech companies can cater to this by offering simplified, cost-effective tax-filing applications or by emphasizing these traits in their advertisements.
Tax season doesn't have to be all doom and gloom.
Nextdoor offers the perfect platform for businesses to connect with their local communities, offering solutions and services shaped around collective tax season behavior patterns.
In providing assistance when it matters most, businesses can not only ease tax season stress but also strengthen their community bonds.
For businesses ready to help their communities ease the anxiety during tax season, explore how Nextdoor can help you at business.nextdoor.com/enterprise
