The recession has hit many Americans hard and many people may not realize that a job loss or new burdens may have positive tax implications. The Internal Revenue Service is helping taxpayers deal with the current economic climate by promoting new ways for people to receive tax help.
Among the steps the IRS is taking to help taxpayers is an “open house” program to allow taxpayers to interface with agents and work out tax problems in person. People who are having financial difficulties and are looking for ways to save money should attend these sessions. These new initiatives may help ease the burden on taxpayers who are having a difficult time weathering the financial crisis,.
The IRS is seeking to use these open houses as an opportunity to explain to taxpayers what tax breaks they may be entitled to. This includes the Homebuyer Tax Credit, which offers a credit to first-time homebuyers, the American Opportunity Credit, which credits full-time students or those who perform community service, the Making Work Pay Tax Credit, which is a credit for employed individuals who make under $75,000 in personal income, and the Expanded Earned Income Tax Credit, which credits low-income workers and helps offset the burden of payroll taxes. If you are unemployed, the IRS offers taxpayers the opportunity to make payment arrangements (such as paying in installments) and have interest charges waived.
Consolidated Credit offers these tax refund suggestions:
Stay away from refund anticipation loans.
You’ve already loaned the government this money over the last year. Refund anticipation loans are costly; by filing your taxes electronically and choosing direct deposit you can have your money in less than two weeks. Even paper filing, which takes up to six weeks, is better since you won”t be paying any additional fees to receive your money.
Save half of the refund check.
The IRS is making it easier to do this by allowing consumers to split their refunds as much as three ways if they choose direct deposit. Earmark at least half of the refund for your savings account.
Pay off high interest debt.
Most U.S. households have an average credit card debt of $9,000. It’s easy to lose your financial footing and it’s hard to get it back, especially if you live paycheck to paycheck. By using some of your refund to reduce your debt you may save hundreds of dollars in future interest payments. To save the most money you should target the account with the highest interest rate.
Review your W4 form.
If you regularly receive large refunds you probably need to increase your deductions, which will decrease your income tax withholding. As with your refund, earmark at least half of the additional money you receive each paycheck for savings and let the interest work for you instead of Uncle Sam.
You can track your tax return at www.irs.gov. Click on the “Where’s my refund?” link on the left side of the screen. Have a copy of your return on hand. You will need to provide your social security number (or IRS Individual Taxpayer Identification Number), filing status and the refund amount. Often times, getting your refund is as simple as updating your mailing address.