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FDIC Consumer News
Happy Returns: Tips for Saving Money at Tax Time
FDIC Consumer News doesn't give tax advice, but we do occasionally have suggestions for you to consider or discuss with your tax advisor. Here is our latest collection of tips to keep in mind as you prepare to file your taxes.
Consider using tax time to pay off high-interest debt or save for the future. "Use your tax refund to pay down high-interest debt and build up your savings," said Luke W. Reynolds, Chief of the FDIC's Community Outreach Section. "For example, purchase a U.S. Savings Bond with some or all of your tax refund. You can also direct deposit your refund into as many as three different accounts and three different financial institutions."
Avoid high-interest loans offered at tax time. In particular, be aware that a "refund anticipation loan" is an expensive loan product arranged by tax preparers for people who file their returns electronically and who don't want to wait for their tax refund.
"Refund anticipation loans are costly and often unnecessary because taxpayers can expect to have their tax refund direct deposited into their bank account within about 10 days of when the return was electronically filed with the IRS," explained Joyce Thomas, an FDIC financial educator in the Community Outreach Section.
"The funds spent on fees and interest for any sort of refund advance could be better used, including saving for a goal or paying down debt," added Reynolds.
Be on guard against tax-related frauds. Examples include scam e-mails falsely claiming to come from the IRS and intended to trick taxpayers into revealing personal information. Other scams involve unscrupulous tax preparers who promise larger refunds than competitors and make fraudulent errors that expose victims to costly fees and penalties.
For more information and consumer tips, go to the tax scams page on the IRS Web site.
Check out programs offering free tax help. The IRS-coordinated Volunteer Income Tax Assistance program and the Tax Counseling for the Elderly service offer free tax-preparation assistance for low-income, disabled, elderly, and non-English speaking taxpayers.
Another IRS program is "Free File," which allows taxpayers who earn $58,000 or less (for returns to be filed during 2011) to use a tax-preparation software program to prepare and file their federal taxes for free through the IRS Web site. Taxpayers who exceed the income threshold can still manually complete their forms and "e-file" them through the IRS Web site.
Ask if you may qualify for unusual tax breaks. "These may vary from year to year, but taxpayers in special situations — perhaps those who started a small business, were unemployed, or lost property because of a natural disaster — should check with the IRS for special considerations that may apply to them," Reynolds said.
For more help or information, start at www.irs.gov or consult a tax advisor.
Last Updated 11/19/2010