Tax day is just around the corner. The Federal Deposit Insurance Corp. (FDIC) and the IRS offer the following tips to help the process go smoothly.
1. Have your tax refund direct deposited into your bank account. The benefits include receiving your tax refund faster and knowing that your refund check will be safe and not lost or stolen. Direct deposit also provides an easy way to save part of your tax refund, because what you don’t see you won’t spend.
2. If you need cash and you can’t wait for your tax refund, carefully consider your options and costs. In particular, “refund anticipation loans” arranged by tax preparers for people who file their returns electronically will get you cash in just a day or two and the loan will be paid back with your tax refund, but the costs are comparable to very high interest rates. Keep in mind that taxpayers who file returns electronically using the IRS “e-file” service can receive refunds in two weeks or less.
3. Make good use of your refund. Consider paying down or paying off your loans and other bills, starting with the ones that charge the highest interest rates on unpaid balances. Start or add to an existing savings account or fund a retirement account or college savings plan.
4. Consider your payment options. If you owe taxes, there are a number of payment options available – including check or money order. Electronic payment options include paying online, by phone using a credit or debit card, electronic funds withdrawal and the Electronic Federal Tax Payment System (EFTPS). Consult your tax professional for more details about the possible costs associated with each option.
5. Know the costs involved if you need to borrow money to pay your taxes. If you must borrow money or use a credit card to pay your tax bill, keep in mind you’ll be paying interest on the amount you borrow. You may also consider applying for an IRS installment agreement, which allows you to pay your tax bill in monthly installments. The IRS charges a fee to set up the agreement. Consult your tax professional or trusted financial advisor to discuss your options.
6. Take advantage of free tax preparation services. One IRS program that the FDIC is helping to promote is the Volunteer Income Tax Assistance (VITA) program, which provides free tax-preparation help to low- and moderate-income taxpayers at various locations. Some VITA sites even have representatives from banks or other organizations who can assist in other ways, including opening a bank account or obtaining a credit report. Another IRS program is “Free File,” which allows taxpayers who earn $58,000 or less to prepare and file their federal taxes for free through the IRS website at www.irs.gov/freefile.
7. Visit the IRS website. The official IRS website (www.irs.gov) is a great place to find everything you’ll need to file your tax return: forms, publications, tips, answers to frequently asked questions and updates on tax law changes.
8. Remember this number: 17. Check out IRS Publication 17, Your Federal Income Tax on the IRS website. It’s a comprehensive collection of information for taxpayers highlighting everything you’ll need to know when filing your return.
9. Review! Review! Review! Don’t rush. We all make mistakes when we rush. Mistakes will slow down the processing of your return. Be sure to double-check all the Social Security Numbers and math calculations on your return, as these are the most common errors made by taxpayers.
10. Don’t panic! If you run into a problem, remember the IRS is available to help. Visit www.irs.gov or call toll-free (800) 829-1040.
Note: The information provided above is not intended as legal or tax advice. Consult a tax professional or the IRS with specific questions.
These tips are provided by the Iowa Bankers Association (IBA), representing banks and thrifts in the state. The IBA serves it members by providing legislative advocacy, training, regulatory compliance and other services designed to enhance the ability of banks to serve their communities. Learn more at www.iowabankers.com.