Tips to Maximize Your Tax Refund

Looking for some ideas to help you save when filing your taxes? Wondering how to maximize your tax refund dollars? We’ve got you covered!

Image courtesy of basketman / FreeDigitalPhotos.net

Image courtesy of basketman / FreeDigitalPhotos.net

Find a way to file your taxes for free using one of the following programs:

  • Volunteer Income Tax Assistance program (VITA) – if your income is $51,000 or less. Call (800) 906-9887 toll-free for the nearest site.
    • AARP Tax-Aide – call toll-free (888) 227-7669 or go to www.aarp.org.
    • “Free File” Program from the IRS – prepare and electronically file your own taxes through the IRS website www.irs.gov.
  • Don’t give up a large chunk of your tax refund for a Refund Anticipation Loan (RAL). Those loan interest fees run 40% to 600% to get your money 10 days sooner. You’ve done without it all year, so why pay as much as several hundred dollars to borrow your own money? File for free and have the IRS direct-deposit your refund in your savings account! Aside from that, in the case of a math error on your return, or if you don’t receive the full refund you are expecting, you still have to pay off the full amount of your loan (RAL) plus the interest.
  • If you have a tax bill, investigate the smartest way to pay it off. Avoid paying with high interest credit cards and loans. Adjust your W-4 with your employer or put money aside each pay period to avoid this situation next year.

Already have your return? Here’s how to maximize it!

  • Look at all your debt payments. Pay off the debts with the largest payments, especially payday loans and credit cards,  to free up the most money every month. Paying off these debts will stop compounding interest.
  • Put a large portion of your refund in an emergency savings fund so you can fund your next emergency instead of borrowing. Think about interest as something you earn on savings instead of paying out interest on debt!
  • Set some of the refund aside to save for the next time the car breaks down, you get sick, etc.
  • Remember that a large refund is your interest free loan to Uncle Sam. A refund is just the government giving you back the money you overpaid in taxes via your paycheck throughout the year. You can talk to a tax expert about increasing your monthly cash flow by adjusting your withholding amounts to increase your pay checks instead of waiting a year for a refund.
For more information about this topic, contact the LSS Center for Financial Resources at 1-888-258-2227 or cfr@LssSD.org.

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