It tax season. Time to pay up or be reimbursed. If you hate this time of year then you will probably wait until April 15th to actually do them and mail them. The commercials for tax preparation companies are in full bloom at 10 decibels higher than all the rest. They have lots of that federal green fanned out in your face with Visa prepaid cards to help entice you to use their services. Here are a few tips to keep in mind that may save you from being robbed by both the government and paid tax preparers.
Don't allow your joint tax filings to go into the mail without going through them yourself. You wouldn't sign a contract without reading it would you? This is no different. Tax filings are a declaration of income and an agreement to pay or be reimbursed based upon your declarations. Like all contracts there are penalties for breaches. If you pay too little you have to pay what you owe plus a fine and interest. If you neglect to declare your taxable income you could lose your freedom. The "babe of the woods" or "ditsy wife" routine will do nothing for you here. You need to be knee deep in this part of your finances. You and your husband both are jointly and severely liable for any penalties just as you both are entitled to the return.
Do take your completed tax forms to a living breathing person to have a second look. There is no shame or time wasted in being extra careful. You can go to a place like H&R Block where they basically use the same computer programs that you can buy anywhere else or can use online. My best recommendation is the government itself. Go in January or February to a tax clinic in your area and let their own employees help you with your filing. If anything goes wrong, that employee's job is on the line.
Don't rely solely upon another person or service to find all of your possible deductions or mistakes. They only know what the computer tells them. People make mistakes and will quickly blame you before they lose their jobs or face a huge fine. They won't have to face an audit if they mess up.
Don't pay for software. You can use an online tax service for federal taxes like the ones you see on TV. State tax filings like in California often have their own Internet filing sites. It has all of the same information. The information that the government sends out on paper is input into computer programs and used by tax preparation companies and websites. If you know someone who has paid for it, you may as well borrow it. It's only good for one year anyway.
Do rat out your boss. There is no excuse for an employer not having mailed out your W-2's by now. You can wait until April and file or file now. Whenever you choose to file, if your employer has not given you what you need there is a form to complete that states this fact. You have to use your last pay stub of the year for that information but it can be done.
Don't get tax return loans. This is about as idiotic of a move as signing your joint return without reading it. Tax refunds are just that, refunds. You paid taxes from every paycheck all year long. Now the government is determining if you paid too little, too much, or the right amount. If you have a refund coming, you have paid them too much. So they are refunding your money. When you get a loan on this, you are getting a loan on your own money. You're paying to get your own money back. It's as dumb a move as a payday advance.
Don't get your refund on a prepay card. There are two reasons not to do this. One is there could have been a mistake. You see how much you are getting a refund for and start spending the money in your head. You get so excited all you can do is think about getting the money now. You get it on the card and when the check comes it goes to whomever gave you the card. But what if the government determines you made a mistake? You will have to pay back what you spent if you over calculated your refund. You could also be cheated if the government determines you missed a deduction. Each year I receive an extra refund for a deduction that between me, my husband, the software and a third party, we managed to miss. Do you trust the company you used to tell you there is more money coming your way?
The second reason not to have a prepaid card for your returns is computer errors. As a bank employee I can honestly tell you that there is ABSOLUTELY NOTHING we can do to get you your money back on the spot if the computer makes a mistake on your transaction. Even if the name of our bank is on the back of your card, we can't help you. Our name on the back means we made the cards, nothing more. Think of it like this. You bank at Wells and go to Chase to use the ATM. The machine processes $200 and gives you $20. You have to file a claim with both Chase and Wells to get your money back. Chase has to process that ATM on schedule, not before, and see how "over" the machine is to make sure you're not lying. Wells has the ability to give credit until your claim is resolved. This could take 30 days in some cases. It's the same thing with the prepaid cards. On top of that you pay a fee when you withdraw from the card. So you are being charged to access your own money.
Do use your refund to pay off any debts, take a vacation, or to reinvest. If you had that money in your hands to begin with, you would have paid bills, taken a vacation or added more to your retirement plan. Do that now. Treat your refund like its just an extra paycheck. It isn't a win from the lottery. Don't use it to make new debts or go all out for material wants rather than to satisfy your needs. Examples would be, using the money to open a CD for your child to save up for private school rather than using it to put a down payment on an Escalade when you live in an apartment with one child and no one else. Or, adding it to an account that has high interest to save for a down payment on a house. The large amount of the check will make higher interest and help you reach your goal faster. Restrain yourself and put it to good use.
Don't cash your refund check. Always deposit it into a federally insured bank. Thieves know you are carrying your refund. There is no insurance on cash. This would be the only time a prepaid card could benefit you. If you have ruined your banking relationships and can no longer bank anywhere then it is better to pay a fee to access your money on an insured card that can be blocked than to carry cash.
Do verify whether or not you have to claim your refund on TANF programs. Some Tribal TANF programs want to know if you got money back because it counts as income for them. Most do not because that one check would instantly make everyone ineligible. This is not the time to double dip. Remember, there are others that need help and you could go to jail.
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