Lots of money flows at tax time. And everyone wants a piece of it. Be smart
and keep all of your refund. Here are our simple tips for holding onto
your hard-earned money.
Tip #1: Say "No" to money advances: rapid refunds, "Money Now" loans, and other
"fast money" products.
Many commercial tax preparers love to sell "rapid refunds." Don't
bite!
These offers are really high-interest short-term loans with outrageously high
interest rates - ranging from 40% to over 700% APR. Worse yet, with electronic
filing, these offers don't deliver your refund that much faster. Typically,
they will speed up your refund by only a week or two, depending on your situation.
Some tax preparers are switching to "prepaid" lines of credit. Again, be careful!
Waiting a few days for your tax return can be a much better deal.
If you fall for these schemes, you
are giving away a chunk of your refund to a money lender.
Keep all of your hard-earned
money and tax credits for yourself and your family. You deserve it! Say "No" to all forms of up-front
tax refund and loan offers.
According to the Center
for Responsible Lending, a 2005 study found that tax preparers and lenders
stripped about $1.57 billion in fees each year from the earned-income
tax credits paid to working parents. If you don't want to be a part of this
statistic, just say "No!"
VITA and AARP Tax-Aide services have better error rates (make fewer mistakes)
than many commercial tax preparers. Many sites offer free e-filing, some offer
home visits, if needed, and some - especially in Portland and Southern Maine - offer help in languages other than English.
Several regional tax help coalitions will also be open this year. They offer both free tax assistance and
help with building assets from the credits you've claimed:
Another way to find a free tax filing center near you is to call 211, or use the 211 Maine website
to
search for free tax sites here.
In addition, the IRS provides
Taxpayer Assistance Centers at a few locations. There
are five in Maine: Augusta, Bangor, Lewiston, Presque Isle, and South Portland.
Tip #3: Or file for free online.
If you don't itemize your deductions, try free
I-CAN!™ online filing. In 2008 taxpayers nationwide claimed over
$102,000,000 in federal tax refunds using this free I-CAN program! It's
simple and it's free. Try it! (Offered in English, Spanish and Vietnamese)
Commercial tax preparers who are offering Free File through the IRS have agreed not to sell "rapid refund" loans.
However, they may still charge you to file your state
tax return. So use
Maine's free I-file,
to file your state return.
Or visit the IRS site for links
to other free online filing options. Each provider sets its own
eligibility rules for its free filing program, so it's worth exploring several
sites to see if you qualify. (If you use one of these sites, be careful about
pop-up ads and add-on fees. Remember: Just say "No!")
Attention Non-resident Aliens: Check out the Guide
for Nonresident Aliens Preparing Federal Income Tax Returnsposted
by the International Office of the University of Texas at Austin (please
note that this guide has not been updated for the 2009 tax year, but hopefully
it will be updated soon):
According to the site, this Guide will help you to:
Determine if you are required to file a tax return;
Determine which form or forms you should file;
Understand the filing instructions; and
Prepare and submit your own federal tax forms.
Tip # 4: Claim all of the tax credits you qualify for.
These five credits can be especially valuable to low-income taxpayers:
Earned Income Credit (EIC)
The Earned Income Credit (EIC) for low-income taxpayers keeps growing.
For tax year 2009, the maximum credit for a household with three or more
children is $5,657. That can be money in your pocket! The IRS has
reported that several million households are leaving billions unclaimed.
So don't forget to claim this credit if you are eligible. Read
more.
Child Tax Credit
This is a partially refundable credit worth up to $1,000 for each
child up to age 17. You must earn at least $3,000 in taxable income to
be eligible.
In the 2008 tax year the scope of this credit expanded. An estimated 2.9
million more children were eligible. An estimated 10.1 million previously-eligible
children received more.
Click
here to watch a video with more information about the Child Tax
Credit.
Child and Dependent Care Tax Credit
This credit is offered by both the state and federal governments. It is
worth only a portion of your total child care costs, and there are caps.
But the state credit is "refundable," meaning that you can claim it (up
to $500) even if you pay little or no tax. More
on Federal Child and Dependent Care Credit More
on Maine Dependent Care Tax Credit
For a video with more information about the Child and Dependent Care Tax
Credit, Click
here.
Educational Tax Credits (the American Opportunity Tax Credit)
This educational credit can be worth as much as $2,500 for students who
are in their first four years of college. The credit is for your tuition
and educational materials expenses. You must meet certain income requirements.
However, you may be eligible for a partial refund of up to $1,000 even
if you do not owe taxes. Immigrants who are residents may also claim this
credit. For more information, see
the IRS website.
Making Work Pay Tax Credit
Many workers got this credit in small amounts in their regular paychecks
during 2009. Read more.
Tip # 5: Say "No" to tax scammers.
Did you receive an e-mail from the IRS asking for your personal information? Watch out!
That letter is a scam. Learn more about how to spot a scam and how to protect yourself
by watching this video from the IRS:
If you want to help spread the word about tax credits for low-income people
and free tax help, or just want to know more about these topics, go to the
Center for Budget and Policy Priorities page: National
Tax Credit Outreach Campaign
More Resources from the IRS
1040 Central
IRS page for individuals, designed "to make the agency’s Web site an even easier-to-use source of
information."
Free
Tax Help Available
This IRS press release outlines free tax help programs offered by the IRS and others.
Sometimes the laws
change. We cannot promise that this information is always
up-to-date and correct. If the date above is not this year,
call us to see if there is an update.
We provide this
information as a public service. It is not legal advice.
By sending you this information, we are not acting as your lawyer.
Always consult a lawyer, if you can, before taking legal action.
