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A Nation Divided: Tax Refunds—Bills or Buy?

Friday, 26 Feb 2010 | 9:17 AM ET

It seems the nation is divided on yet another issue: what to do with a tax refund check.

Tax Refund Check
AP
Tax Refund Check

Half of all consumers receiving a refund will be taking their check and immediately sending it off to pay off credit cards and other bills, while the other half has earmarked the money for a shopping spree, according to a survey of 630 consumers who have already received their refunds that was conducted by America's Research Group.

The results are a sharp departure from past years, says Britt Beemer, chairman of the market research firm.

"This year, there is no middle ground," Beemer said. In the past, people would usually divvy up the money, taking a portion for bills or savings, and use the remaining portion to make a special purchase.

But this year is different. "In the 20 years I've been doing this research, I have never seen these answers before," he said.

What's more, Beemer's research uncovered another noteworthy trend. It seems the more taxpayers receive back from Uncle Sam, the more likely they are to put the money toward bills, while those receiving a smaller refund check are more likely to splurge on something new.

He's interested to see how this trend will hold up throughout the tax season. About 74 percent of consumers are owed a refund, according to Beemer.

Beemer's also seeing the same trend H&R Block noted in their profit warning earlier this week: more consumers are rolling up their sleeves and preparing their tax returns themselves.

While that's not good news for tax preparers like H&R Block and rival Jackson Hewitt Tax Service, it's likely to help companies like Intuit's, which makes TurboTax.

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Questions? Comments? Email us at consumernation@cnbc.com

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