Money and Banking Tips for Tax Season
How can you save money and avoid a variety of problems at tax time?
Guard against tax-related frauds. Examples include scam e-mails falsely claiming to come from the IRS. Many of these are intended to trick taxpayers into revealing Social Security numbers and other personal information that criminals use to steal victims' identities and money, including tax refunds. Others involve phone callers saying the taxpayer owes money to the IRS that must be paid promptly by wire transfer (that actually goes to the crook) or by loading funds onto a prepaid debit card and then sharing the number. The scammer may try to intimidate a targeted victim who refuses to cooperate, such as by threatening arrest or suspension of a business or driver's license.
Carefully choose how to prepare your taxes. At tax time, you gather and submit a substantial amount of sensitive information that, if misused, could cause you significant problems. If you are using a computer program to prepare your return, make sure that your computer has an up-to-date security package. If you plan to hire a tax preparer, consider factors such as the preparer's professional background and the likelihood that the preparer will be around to help you answer questions the IRS may ask months after your return has been filed. After you choose a preparer, carefully review the completed tax return and question any income and/or deductions on the return that you do not recognize.
Be cautious with offers by tax preparers to handle your refund. These include suggestions that they can somehow get your money faster or that you should direct deposit your refund into any bank account other than your own. These services can be costly and perhaps even put you at additional risk for fraud. Keep in mind that the IRS issues refunds to more than 90 percent of taxpayers in less than 21 days.
Direct deposit your tax refund into your bank account. Direct deposit is generally the fastest and safest way to get your refund.
Put some of your refund into savings or toward paying down debt. If you're expecting a refund, consider deciding how much of it you can save toward a goal or for a "rainy day fund" for unplanned expenses. You can direct deposit your tax refund into up to three different accounts at three different U.S. financial institutions, including savings accounts. And, you can use part of your refund to purchase a U.S. Savings Bond for yourself or for someone else. Also consider using part of your refund to pay high-cost loans and other bills, starting with the ones that charge the highest interest rates.
If you owe money on your taxes, consider the best way to pay it. You can have your payment withdrawn electronically from your bank account on a date you specify, such as April 15, but make sure you have enough money in your account. If you don't have money to pay your tax balance, you have several choices, including an IRS monthly installment plan. Also, remember that borrowing money on a credit card to pay your taxes can be costly.