Tax refunds don’t translate to fast cash

Paying back a government loan

Consumers looking for fast cash should use their tax refund wisely. When people get a tax refund, they are getting a refund from the government on the principal of a year long loan. Interest isn’t part of payment and many people pay too much over the year. This is best handled by adjusting withholding upon situation changes, i.e. the purchase of a home, or sale, or a marriage, etc. Taxpayers that get a good tax return should be shrewd with the extra money and put it too good use.

Using a refund to pay down debt

By far the most important thing to do with a tax refund is to pay down debt. Since the recession forced people into hefty debt, a record number of people have been overcome with large interest rates. The accumulating debt needs to be paid down if anyone is to get out from under financial stress. Using a tax refund to pay debts is a great idea. That doesn’t mean only credit card debt, but also mortgage, car loans or student loans. For instance, one double mortgage payment per year can take two years off the term of the loan.

Building an emergency fund

Tax refund money can also be used to build up an emergency fund. One thing consumers learned throughout the recession was that cash reserves are the only sure-fire thing to count on. Creditors closed shop when the economy began to tank and it got too difficult to manage. Consumers who thought they would keep one emergency credit card stored away were surprised when lenders closed the unused cards or at minimum, slashed limits.

The lesson of the whole thing was that liquid assets are essential to maintain. When it comes to a tax return, the money can be used to start a good financial reserve. This can serve as a critical buffer for emergencies or disasters that require cash. It is suggested that people should have three to six months of expenses in savings as emergency money at all times.

Tax refunds into retirement savings

Fast cash from a tax refund can also be channeled towards retirement savings. Saving for retirement needs to be a priority for everyone. As Social Security winds down to oblivion, more people are going to have to take their retirement plan in their own hands. Experts caution that other priorities should not take precedence. Mark Zandi of Economy.com said, “Too many young parents prioritize their children’s education fund before their own retirement. The bottom line is – education can be funded through loans, grants, scholarships and part-time work. Retirement can’t.”

Fund an education account

On the other hand, if a consumer has their own retirement fund on track, using a tax refund for education may be a wise idea. It is never too early to start saving for college and the cost is expected to rise. There are many savings plans available, including an ESA plan and 529 plans. The sacrifice of money into the account right away is an option, and it will save money over time and a good education is invaluable.

Tax refund funding

Gone are the days when consumers viewed a tax refund as fast cash to spend frivolously. In today’s market, it’s crucial to manage money wisely. It’s especially crucial to manage money that comes to consumers in hefty amounts. As Zandi added, “Substantial amounts of money don’t come to consumers that often, so a tax refund is something everyone should be ready to take advantage of, and use in the most beneficial way possible.”

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The earlier you file your taxes, the sooner you get your return

Tax time coming soon

One of the easiest ways to find money now is to get a jump on filing income taxes. Many consumers wait until April to start gathering their paperwork together. They bring them to their tax preparer and want a rush job. The problem with waiting is that it opens the door for mistakes and it makes the time to get a refund that much longer. Anyone wanting to get the jump on filing, here are some tips.

Getting the jump on taxes

The first thing taxpayers need to be aware of is Schedule M. Schedule M is a new tax document that is used to account for the “Making Work Pay” credit money received on paychecks. The new payroll tables from last year that put an extra $ 400 in the pockets of single people or $ 800 for married couples filing jointly. For some taxpayers, however, they may have paid too much into the fund. To correct the over taxation, consumers have to file a Schedule M.

Secondly, you have to get your paperwork together. January to mid-February is when W-2s and other tax-related documents start coming in. Consumers should create a special place for all tax documents. The requisite information for these documents and getting it all together at once will make it easier to finish tax paperwork.

Thirdly, you have to double check things like social security numbers. Though it sounds rudimentary, there are a surprising number of tax returns received without the correct numbers. It holds up processing and refunds for thousands of filers. The correct number is critical, because a lot of transactions are directly tied to them. Everything from income statements to retirement plan contributions are recorded based on the social security number.

Fourthly, you need to know what filing package is the best to get. The IRS package is based on the filing history of a taxpayer, but that can change. Many documents are accessible online or at the library of post office. For taxpayers who had a major change, like marriage, it’s important to find the right documentation. Married couples looking for money now have to file with the right documents and in the right way.

Fifthly, think about electronic filing. Studies have shown that last year about two-thirds of all taxpayers filed electronically. The IRS processed E filed tax returns 50% faster than paper returns. Many of the software programs have a review function, where the return is double checked for innaccuracies and errors. The good news for E-filers is that taxpayers may qualify to file for free. Taxpayers this year with adjusted gross income of $ 57,000 or less for 2009, can file for free thanks to a cooperative program between tax software companies and the IRS.

Finally, taxpayers can elect direct deposit. A paper return takes weeks to get to the IRS, get processed, and a check to be cut and then sent. Conversely, it usually takes 10 to 14 days for a direct deposit to get to a bank account. Taxpayers that desire direct deposit have to file Form 8888, but it speeds up the process.

Filing in 2010

Now more than ever, filing tax returns is being made simpler and simpler for taxpayers. Those who want their tax return money now should follow the above tips to speed the process up. There are millions of tax returns that have to be reviewed and consumers looking for quick ways to file should use every advantage available.

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Don’t fall for scams on Web, IRS warns

The federal income tax deadline is months away, but scam artists posing as Internal Revenue Service officials are still out in full force.

This year, the IRS has worked with cybersecurity agencies to shut down nearly 2,000 Web sites that falsely invoked the IRS name or logo in an effort to persuade taxpayers to hand over personal financial information, according to agency spokeswoman Dee Harris. The scam artists behind those sites use the financial information they collect to open credit cards, apply for new loans or make purchases under that person’s name.

“We’re seeing a lot of different scams,” Harris said. “The scams seem to be year-round and they take different angles to try and scam people.”

Some of the tax scams play on the Making Work Pay Refund, a refundable tax credit made available through the American Recovery and Reinvestment Act of 2009. The credit is passed on to workers in the form of a decreased tax withholding from their paychecks. But scam artists posing as IRS officials are approaching some individuals via e-mail and asking them to register with the agency so that the refund can be deposited into their bank account.

In other cases, scam artists tell taxpayers that they are due lottery winnings, recovered inheritance money, or tax refunds. In each of those scams, the consumer is asked to turn over personal financial data either by return e-mail or by entering it into a fraudulent Web site.

In addition, Harris said consumers who click on some of the links in e-mails from scam artists may inadvertently download spyware or other forms of software that compile information from their computer without their consent.

She encouraged consumers to be wary of unsolicited calls or e-mails that appear to come from the IRS. The agency does not initiate communication with taxpayers or collect personal financial information by e-mail or by phone.

“We’re not going to call them requesting personal information,” Harris said.

Cynthia Albert, director of operations and media relations for the Better Business Bureau of New Orleans, said consumers should always be careful when responding to requests about personal financial information.

“We tell everybody, no matter what they’re telling you on the Internet or on a cold call, do not divulge private or sensitive information without checking the source,” said Albert, who recommends looking up the phone number of any soliciting business or agency and calling them back to verify the information request. “They’re going to steal your identity and it takes a tremendously long time to get this straightened out.”

E-mail scams can be sophisticated and hard to detect, but Harris said there are several red flags that taxpayers can watch for. E-mails that request detailed or an unusual amount of personal information, those that dangle some sort of bait to get the recipient to respond, and e-mails that use extremely long addresses in any link contained in the message should all be viewed with caution, she said.

Anyone who has received a questionable e-mail claiming to come from the IRS should forward it to phishing@irs.gov, a mailbox the agency has established to review such missives. Harris also said individuals who have questions about whether or not the correspondence they received is actually from the IRS should stop by one of the agency’s local offices or call the agency at 800.829.1040

Furthermore, if you get a call from someone telling you that you have money coming to you and wants you personel finance info, Hang up the phone right away.. Legitimate companies are affiliated with the BBB, Dunn & Bradstreet, the NATP and other Well know industries. If you have a tax problem. Contact IGNCT. the Nation’s largest and most successful tax resolution firm. @ IGNCT, your case will be assigned with a real tax Attorney. You may request the CV of that attorney if you desire.

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