Generally when tax season rolls around, there’s a sense of gloom in the air. “Have you filed your taxes yet?” becomes the ever-popular question, and it pervades our everyday lives until we’ve finally sent them off. As long as you’re armed with the proper information, there’s no need to dread these first few months.
If you are a low-income earner, you may be eligible for free tax preparation. The IRS sponsors numerous Volunteer Income Tax Assistance (VITA) sites, including two in the Arlington/Alexandria area. Visit http://dceitc.org/how_to_file.html for more information. You may qualify for the Earned Income Tax Credit, one of the biggest government benefits provided to low-income persons to alleviate poverty. If you do receive a refund, try to save as much as possible.
Tips for all filers:
- Be prepared for direct deposit. If you receive a refund, the fastest and best way to process it is by having it directly deposited into your bank account. Bring your checkbook and/or your bank routing and account number to provide to your preparer.
- What if you owe money? If you owe taxes, your best course of action is to file your return no matter what, then pay what you can by the deadline (federal deadline is April 15, 2013). If you cannot pay the balance, contact the IRS at 1-800-829-1040 to set up a payment plan. The IRS can be very accommodating, as long as you keep the lines of communication open.
- If you have either a big refund or a large amount due, consider changing your withholding in your current paycheck. Go to http://www.irs.gov/Individuals/IRS-Withholding-Calculator to determine the appropriate amount to withhold each paycheck, then complete a W-4 and forward it to your HR Department.
Are you planning to visit a paid tax preparer?
- Shop around. Ask friends and family for recommendations, but be careful to check other references. There are plenty of scammers in the tax preparation business who would love nothing more than to take your money and run. Look for a permanent office and check the BBB website for any previous complaints. Keep in mind that even if the BBB has no complaints listed, it isn’t a guarantee that the company is reputable. The preparer should be thorough and record all information in accordance with tax laws. Just because you made income in cash, doesn’t mean you don’t have to report it to the IRS. The tax preparer should ensure all income is reported accurately.
- Ask about fees at the beginning. The tax preparer should not base his/her cut on your refund amount, and it’s possible he/she will charge more for additional forms prepared (such as Schedule C).
- Avoid refund anticipation loans (RALs). This is a very expensive way to receive your refund early. You can be charged a very large fee, and it isn’t much of a benefit since refunds are usually sent within a few weeks.
- Before you sign the returns, make sure all information appears accurate and complete. The preparer’s Employer Identification Number (EIN) or SSN should be listed on the return. Have the preparer answer any questions you have to your satisfaction. After signing, keep a copy of your return for your own files.
- It is ultimately your responsibility to file an accurate tax return. If the IRS finds an error in your return, you will be the first person it contacts, not the preparer.
For other tax assistance, contact Community Tax Aid.
Cooperative Extension will be providing financial counseling at both Arlington and Alexandria VITA sites, on Tuesday & Wednesday evenings and Saturday mornings during the tax season. Even if you are not intending to file with these preparers, you are welcome to sit down with us to discuss your financial concerns. Please visit our calendar for dates, times, and locations.