We are bombarded with advertisements on television, radio and the Internet, singing the praises of tax preparation services, software and speedy refunds. We naturally have questions about the pros and cons of these options.
Should I prepare my own return? Are there other options? Many people find preparing their annual tax return themselves a challenging and rewarding annual process. For others, the prospect of doing this without outside help is daunting.
Filing your taxes does not need to be stressful. There are several computer programs you can purchase or download that explain what to do step-by-step. If you do not have access to a computer, tax forms and publications are available at public libraries, post offices and from the IRS, free of charge.
You can also use tax preparation services or consult with financial experts, like certified public accountants or tax attorneys, when filing your return. Reputable tax professionals can assist with complex returns, and their expertise often provides peace of mind to consumers with concerns about their taxes.
If you choose to use a tax preparation service, always ask for a breakdown of the various fees upfront before the return is prepared. The fees may include a charge for preparing the return, for electronic filing and, for automatic deposit of refunds in your bank account. Services like electronic filing and direct deposit are not required, but may be worth the extra cost to you, because they speed up the process.
Consumers are not obligated to purchase many of these services which are considered optional. Say no to any service that you do not want. Don't be afraid to ask questions. It's your money. If you don't feel comfortable with something, voice your concerns to your preparer.
My tax preparer offers a speedy refund - is this a good idea? No one can provide you with a "refund" of taxes you paid except the IRS or the state and local taxing authorities. If you see an advertisement offering money upfront, before your return has been processed and a refund issued, you are being offered a loan - a Refund Anticipation Loan ("RAL") - not an actual refund.
Can I benefit from a RAL? RALs are high-cost, short-term loans secured by a taxpayer's expected refund. RALs provide consumers with an amount of money that is less than the amount the consumers would receive if they waited for their actual refund. Refunds are reduced by the fees charged by the tax preparation service, which may include loan fees, electronic filing fees, document preparation fees and tax preparation fees. There may be additional charges for late repayment.
Many consumers use these types of loans because they want quick refunds. However, a cheaper and better alternative is for consumers to file their taxes electronically and have the refunds directly deposited into their own bank accounts. By doing this, you can still get your money back quickly, but without incurring interest and other loan fees.
Are any tax preparation services available if cost is a factor? Low to moderate-income consumers may also qualify to have their taxes prepared for free. The Volunteer Income Tax Assistance (VITA) program offers free tax preparation for taxpayers who earn $49,000 and below. To locate the nearest VITA site, call 1-800-829-1040. Also, seniors can also take advantage of the IRS-sponsored Tax Counseling for the Elderly (TCE) and AARP's Tax-Aide programs. These programs provide free tax help to people age 60 and older. For more information on TCE call 1-800-829-1040. To locate the nearest AARP Tax-Aide site, call 1-888-227-7669.
The Armed Forces Tax Council provides free tax preparation services worldwide to military personnel and their families. These volunteers are specially trained to handle military specific issues such as combat zone tax benefits. Service personnel can file the return online, designate the refund to their direct deposit account and receive their refund in about a week.
What else should I remember at tax time? Remember to safeguard any paperwork that includes personal and financial information - like your tax returns and forms - to protect you from identity theft.
Consumers who wish to file a complaint regarding a tax preparation problem should contact the Bureau of Consumer Protection at 1-800-441-2555 or www.attorneygeneral.gov.
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