Wednesday, March 19, 2003
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Wednesday, March 19, 2003 |
CCCS offers consumers tax-time tipsThis time every year Uncle Sam becomes a part of consumers' financial lives. Many will owe a tax payment and not have the money to pay. Others will receive a tax refund and, a month later, have no idea where the money went. "Consumers often make financial mistakes at tax time," CCCS President Suzanne Boas said. "Taking the time to prepare early and budget for tax payments or to use a tax refund wisely are smart financial moves that consumers should make." To help, CCCS offers consumers the following tax tips: Save money and wait for refund. Refund anticipation loans sound great when advertised on television. "Get your money now. Don't wait." However, this is a loan and comes with a very hefty interest rate. The average refund anticipation loan has an annual percentage rate of 116 percent. Not only that, but because it is a loan, if the IRS denies any of your deductions, you are still responsible for the entire amount of the loan. Keep all of your refund and wait a short two weeks average for automatic deposit when filing electronically or six weeks average to receive a check by mail. Consider the best use for a tax refund. For some taxpayers a tax refund is considered unexpected income and treated as a reason to celebrate and spend. Though it is natural to want to go out a treat yourself, a closer examination of your financial situation my reveal a better use for the money. High-interest credit card debt costs consumers an average of $1,440 a year in finance charges. Paying off this debt is a sound financial move. Other smart moves are to put the money in savings if you do not have a cushion of three-to-six months of expenses in the bank or fund your retirement account. Take time to file. No matter what, always file your tax return or file for an extension. The IRS accesses a penalty if you do not file a return. So if the reason you do not file is because you do not have the money to pay taxes owed, you have just increased the amount by not filing. Consider your options for borrowing the money, or send the payment amount you can at the time of filing and contact the IRS right away to make arrangements for payment of the balance due. Face your tax problems. Taxpayers who owe back taxes would be wise to communicate with the IRS regarding payment. The IRS can and will place a lien on all of your property and future property to collect taxes. Do not believe that you will not have to pay the taxes owed from previous years if the IRS has not contacted you. Not only will they eventually contact you, but also you will have been accruing penalties and interest from the time the tax was due. Examine withholdings carefully. Whether receiving a tax refund or sending a tax payment, review your W4 form. If you are consistently receiving a large tax refund, you are giving Uncle Sam an interest free loan every year. Increase your withholding and earn interest income on that money yourself. Likewise if you consistently owe Uncle Sam taxes, lower your withholding. You may need to have your employer take additional money out of your paycheck in taxes if you are already claiming zero on your W4. For those self-employed, it takes greater discipline to set aside a portion of earnings for tax payments. Make sure to do so, or you could be digging yourself a large taxpayer hole. Double check before mailing return. Review all documents included in your tax return. Make sure the return is signed. Be sure you have claimed all deductions for which you qualify. Double-check your addition. Compare with last year's return to determine anything you may have forgotten. Seek help. If you are at a loss as to how you will pay your taxes or would like help budgeting so you will not be in the same position next year, contact CCCS at 800-330-CCCS (2227) or www.cccsinc.org for help. Consumer Credit Counseling Service (CCCS) is a nonprofit, community service agency dedicated to empowering people to achieve a lifetime of economic freedom. A United Way partner, CCCS provides free, confidential budget counseling, community and personal money management education, debt management programs, and comprehensive housing counseling. CCCS provides counseling in English, Spanish and American Sign Language (TTY 770-716-9666). Help is available 24/7 at 800-330-CCCS (2227) or www.cccsinc.org.
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