Whenever you receive a tax refund, you may be tempted to rush out and spend the entire check. But before you do that, let’s look at some of the best ways to use that money. You want that money to work for you, not the local retail store.
1. Give it away. Whether you give a portion or all of it, an investment in the kingdom of God will pay bigger dividends than anything else you can do with it.
2. Pay off debt. I know that’s not a very fun use of it. But if most of your debt is in credit cards, you’re paying 10-33% interest (most people pay over 18%). Paying these debts off can save you a lot of money down the road. You might even want to pay down on your house or car loan.
3. Invest in your own financial education. Buy some books that show you how to use your money better. Go to a conference that teaches you how to grow your business or start a business. Even consider hiring a mentor or fee-only financial planner that can help coach you through some problem areas.
4. Invest in your future (or your family’s future). This might mean buying term life insurance in case you’re not around to provide for your family. Or, if you’ve already done that, then invest in your long-term future — retirement. Open a Roth IRA and invest the money there.
5. Prepare yourself for emergencies. Everyone needs to have some cash in a savings account “just in case.” You never know when an unexpected cost will come up and wreak havoc on your budget. This is one of the biggest reasons people go into debt — they don’t have any cash to pay for the surprise bills. I recommend you have between six months and a year’s worth of your salary in a savings account. This will hold you over if you lose your job or need cash for an emergency. Your tax refund will give you a big push toward that goal.
Put your tax refund to work. Don’t just spend it unless you have these other areas taken care of already. You’ll find the rewards are far greater. Once you’ve figured out what to do with this tax refund, take steps to minimize next year’s refund. You never want to give the government an interest-free loan.
Steve Kroening writes for Success magazine and also publishes Wisdom’s Edge. You can get Biblical tips on health, finance, relationships, parenting, and success, delivered to your email inbox every week. Simply visit http://www.wisdomsedge.com and sign up for this free e-zine.
There are several methods which can get you your tax refund quicker. It depends on whether you keep detailed records on at least a monthly basis or not. The price of good organization is the rapid response to your tax return. It will help you, if you are a business rather than an individual, to have conscientious employees. You must first have the means to determine whether you have a refund. Some have tax attorneys, if this is your case then insure that you have the very best tax attorney who has a fantastic accountant. They will have your books updated monthly and will probably have your tax return ready to file before January 31. They can submit your return electronically over the internet through your tax attorney. If you aren’t in this category then you can take all your expense records which include sales slips, interest for school loans, medical expenses, records of loss from investments, thefts and personal checks from your bank account with your 1090′s from all of your jobs to a well known tax agency. They will review your records and assist you in claiming any legal deductions. Some of these agencies will for a percentage of your return provide you a check immediately for any return funds owed you by the federal and state governments.
Another method can be the use of the EZ tax form whereby you only take the standard deduction and skip making detailed deductions. Another method is the EZ eform tax return where the tax payer goes to http://www.irs.org and uses tax preparation software free. There are several free contractor provided tax preparation software packages for you to use in preparation of your tax return. Each walks you through your tax return where you can choose whether to take the standard deduction or itemize them. The software is extremely reliable and should enable you to accurately complete your tax return. After they complete the process of correctly preparing their tax return online, you can sign it electronically and submit it immediately. This will start their tax return process much faster than snail mail.
However, if you should have problems there are several toll free telephone numbers you can call. They are 1-800-829-1040 for individual citizens and 1-800-829-4933 for businesses. You should remember that the IRS is very sincere about giving the very best service possible to its’ customers. The Taxpayer Advocate Service was created to address just that; giving the best service to the taxpayer especially if the taxpayer is experiencing economic difficulty due to tax problems or if the IRS procedure are not addressing the individual’s problem. You can contact the Taxpayer Advocate Service by dialing their toll-free phone number at 1-877-777-4778 or TTY/TDD 1-800-829-4059, by writing or calling your local taxpayer advocate, whose address and phone number can be found in your local phone directory under the government listing. You can also find this information in the U. S. Publication 1546, The Taxpayer Advocate Service of the IRS-How to Get Help With Unresolved Tax Problems, by filing a Form 911, Application for Taxpayer Assistance Order with the Taxpayer Advocate Service or by asking an IRS employee to complete Form 911 for you. If you need to get a copy of the Form 911 or learn more about the assistance available through the Taxpayer Advocate Service, please go to http://www.irs.gov.advocate. Another resource for you is the Low Income Tax Clinic operated in your area. They provide for free or a slight fee for representation whenever there are issues with the IRS that cannot be solved through normal channels. Check online with the IRS or in the phonebook for the nearest LITC. This agency provides help for minorities for whom English is a second language.
Gray Rollins writes for EasyTaxSupport.com, a site that provides tax tips. For more tips, like common tax mistakes and what happens when you can’t pay your tax bill, visit Easy Tax Support.
This tax season 10% of Americans will let someone borrow them their own money through a refund anticipation loan. Rates might be as high as 744%. A rapid refund is just your income tax refund given to you on the spot by your tax preparation service- usually within 1-2 days. Rather than waiting for your tax return to come through the mail or via direct deposit directly from the government some people are choosing to get money in their pockets immediately at a great expense to themselves. Despite the length of the loan lasting only about 10 days they are costing individuals hundreds of dollars in some cases.
Predatory Lending
Overall this predatory lending practice is estimated to cost Americans as a whole about 500 million dollars a year. Unfortunately poor people tend to be affected the most because they have a greater need to get their money as fast as they can. Those targeted most tend to be recipients of EITC, the Earned Income Tax Credit. They recently accounted for 55% or refund anticipation loans. The program, formed in 1975 to help low wage workers is being undermined by tax preparation services that are eating away at these refunds. Refunds that are being awarded based on the EITC cornerstone that qualifiers for EITC get most of the federal taxes refunded in an attempt to relieve poverty for hard working people.
It seems silly to many of us that someone would pay as much as $218 out of a $760 dollar tax refund to get their money in 1-2 days instead of only 10 days when filing electronically, directly with the IRS. But many of us don’t understand the desperation so many people feel when they are trying to make ends meet on a low income.
Tax Education
People need to be educated that they don’t have to give up their money in the first place. Employers will let workers change their W 4 forms to adjust their withholding to more closely match their tax responsibility. That way, people aren’t paying out their wages in taxes throughout the year unnecessarily in the first place. People also need to be educated that electronic filing is free for many people now and with direct deposit it only takes about 10 days to get a refund.
Tax Help
If your financial life is difficult its important to weigh the benefits and drawbacks of getting money fast vs. getting more money by waiting only 8-9 more days. Free filing is available to those who qualify using the criteria that can be found at www.irs.gov. Assistance from the Volunteer Income Tax Assistance program is available for people with incomes less than $35,000. VITA can be reached at 800-829-1040 with sites around the country. Keep what is yours – don’t let H&R Block or Jackson Hewitt keep part of your hard-earned income. Explore your options and be patient- it might save you a couple hundred dollars or more.
Ron Finkelstein is NOT a Tax Attorney or an accountant. He is merely a small business owner who has paid a lot of money over the years to learn a whole lot about Taxes and Time Management.
If you enjoyed this Tax Refund Anticipation Loan article, you should check out more Tax Tips and How to get Free Tax Software
