Local programs make it possible to avoid unnecessary fees and charges
Tax day comes late this year (April 17), but a quick glance along the Avenue makes it look like the filing is tomorrow.
Businesses have dancing mascots that look likeUncle Sam and the Statue of Liberty, as well as life-size dollar bills, tax forms and more. Some storefront businesses opened before the close of the year, promising quick and easy filing of income taxes or instant refunds that translate into cash now. And in tough economic times, many consumers are being tempted to use one in order to take a hammer to the I.R.S. piggybank a little early.
CASH, which offers free tax preparation and filing services at various locations throughout the city to those who made $25,000 or less in 2011 (as an individual), or $50,000 or less in 2011 (as a family), is warning individuals and families to avoid expensive preparation fees or charges associated with rapid return operations.
In many cases, a fast-tax-refund establishment (many of which seems to crop up just after the first of the year) will calculate refunds and then cut a check to the individual. The process is called a Refund Anticipation Loan, or RAL. RALs generally carry extra fees and/or service charges, as well as high interest rates. Those fees and interest can cut into refund quite substantially. It’s certainly legal to use a RAL; consumers just need to be aware that often, the loan carries fees that detract from the toal refund.
Earned Income Tax Credit
“I think people don’t realize that a lot of the tax preparation businesses out there are for-profit businesses,” says Johnson, “and that by the time you walk out of there, you can have given up almost 30 per cent of your refund.”
Instead, she says, individuals and families should look for programs like the CASH Campaign, which are sponsored by the Volunteer Income Tax Assistance (VITA) program of the IRS.
Yes, the IRS. They’re behind free tax preparation for people on limited incomes.
“Those really are free,” she adds. “There are no hidden fees for anything.”
The CASH campaign, on its website, www.baltimorecashcampaign.org, encourages low-income residents to see if they qualify for other forms of governmental assistance, such as the Earned Income Tax Credit (ETIC). Information on EITC is available through the IRS and the Cash Campaign’s sites, as well as through other providers.
“A lot of people don’t understand about the tax credit and how it differs from their refund,” says Johnson. “But if people are eligible, it can be a significant amount of money.”
The Procrastination Trap
Many individuals (of all socioeconomic groups) are intimidated by the proposition of completing and filing their tax forms, Johnson adds.
“You know, when we first open our offices each year, we get a rush of people who want to get their taxes done. But we also have plenty that wait until the last minute.”
Those in need of financial assistance can check to see if they qualify to have their taxes prepared for free by volunteer tax preparation services. The CASH Campaign is one, and the VITA program can provide information on other sites; to locate one, call 1-800-829-1040. The Baltimore CASH Campaign’s website is www.baltimorecashcampaign.org; the phone number is 443-692-9487.
Many local senior centers also offer tax preparation services; individuals who qualify can call their center to see what is available.
What to Bring
Those who are attempting to use the free services provided by any organization should bring all documentation (or as much as possible) with them. Needed will be the following:
Social Security card for each family member
W-2 forms for all jobs worked in 2011
Child care provider name, address, and tax ID number (if applicable)
All banking account information (a voided check and/or saving deposit slip) so that refunds can be received via direct deposit
A copy of last year’s tax return, any document or information about money received from the IRS or Maryland, all 1099 forms for other income (if applicable), and any other tax-related documents received. Note: Every adult on a family’s return must come to sign the return.
While many free locations welcome walk-ins, it’s always best to call in advance for an appointment, since some days are busier than others.
For a list of free locations available through the Baltimore CASH Campaign, go to the website of www.baltimorecashcampaign.org, find the link to “Services” and then scroll down the page. The IRS can also provide assistance on free filing programs; use the search feature on the website, and type in “free tax preparation.”
The taxman cometh, say the pros. But the good news is that free help cometh, too.
by Mary Helen Sprecher