What Will YOUR Patients Do with Their Tax Refunds?

​Do you know that the average individual federal tax refund received last year was more than $2,700? And about three out of every four Americans receive a refund every year?

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What Will Your Patients Do with Their Tax Refunds?

How to Spend Tax Refunds Wisely

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Do you know that the average individual federal tax refund received last year was more than $2,700? And about three out of every four Americans receive a refund every year?

For many taxpayers, the annual refund is the largest single check they receive all year. Why not encourage your patients to use that money to improve their financial health by paying off medical debt?

Ways to Spend It

There are a myriad of ways for taxpayers to spend their refunds. Some may be tempted to splurge on a new wardrobe or book a cruise. While that may sound glamorous, it’s definitely not the wisest choice for those who are carrying medical debt.
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Here’s how you can encourage your patients to invest in their financial health instead:

• Remind them that they can prevent damaging their credit score or becoming charge-offs if they use the refund to catch up on medical debt.

• For patients whose medical debt is more than the tax refund, work out a payment plan with them for the remainder.

• On the other hand, if the refund comes close to covering the debt, you can offer to accept a settlement, with the refund as payment in full. ​(Note: Be sure your patients are aware that the IRS may regard the unpaid portion of the debt as taxable income.)​

Tax Refunds
Used for Healthcare
Spending tax refunds on healthcare is not unusual.  A 2018 survey by JP Morgan and Chase Institute revealed that the week following receipt of a tax refund, healthcare spending increases 60% overall. What’s more, for that same week, out-of-pocket healthcare spending via debit cards increases by a whopping 83%.

These increases were particularly pronounced among the bank customers who had the lowest balances in their checking accounts.

• Inform your patients that serious medical debt can negatively impact their financial well-being. In fact, it’s the leading cause of consumer bankruptcy.

• Offer suggestions about ways they could free some cash by taking care of other debts. For instance, by settling credit card debt, they’d have extra money to pay down medical bills.

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The All-Important Emergency Fund

Finally, advise patients to avoid future debt by creating an emergency savings fund. By setting aside just $500 or $1000 in a special savings account, they’ll have a protective buffer against unexpected medical bills. 
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While most financial experts suggest that the emergency fund should ideally contain the equivalent of three to six months’ salary, even a few hundred dollars can keep your patients from incurring future medical debt. 

Then, after they’re free of medical debt, they can use subsequent tax refunds to build up this emergency fund.

​A Health Savings Account is another option you could suggest, especially for patients who are enrolled in high-deductible insurance plans. HSAs are a tax-free way to help them save for future qualified medical care.
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Of course, using a tax refund to splurge on luxuries sounds like a lot more fun than paying down medical debt. But encouraging your patients to make the wise choice will help them reap financial benefits, both now and in the future.

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Sources:
Featured Image: Adobe, License Granted
Forbes
Washington Post
CNBC
Investopedia
Lexington Law