Joan Jensen, President and CEO of Central Credit Union of Illinois (https://www.centralcu.org/), came into our ABC7 studio to give us tips for last-minute filers and refund reapers.
A. Last-Minute Filers
1. Online vs. Desktop
a. Is the State return included in the price?
Some tax software includes a state return while others charge extra.
b. Which version is best, basic, deluxe or premium?
Basic rule of thumb, especially when filing last minute, is to go with the highest version offered
This will ensure you have all the features you need to finish the job.
c. Is there a toll-free number, email address or online forum for accessing customer support help in using the software and answering income-tax related questions?
d. Is there a Guarantee?
And if you are audited, will a tax pro be provided to assist you at no added cost?
If there is an extra charge for this service, what is it and when is it due?
2. File for Free
At Free File you can prepare and e-file your federal return for free.
Participating software companies make their products available through the IRS. (Some support state tax returns).
This service is available to everyone whose adjusted gross income (AGI) is $57,000 or less. Visit http://apps.irs.gov/app/freeFile/jsp/wizard.jsp for more information.
You can also use Free File to e-file an extension request ( Form 4868).
3. File Electronically
When you are finally ready to file your return, file electronically.
With time running out, not only is e-filing faster, but it's also more accurate and includes a confirmation from the IRS that your return has been received.
B. Early Filers With Refund In Hand
1. Pay Down Credit Card Debt
Stop the cycle of paying double-digit interest rates on credit card debt.
Jump-start your pay down by applying your tax refund to the highest interest rate balances.
Then, adjust your W-4 form tax withholding so you can keep more of your paycheck and pay your credit cards off quickly.
2. Boost Your IRA
If you haven't maxed out your IRA contributions for 2012, you have until April 15 to make a contribution for 2012.
You will need to amend your 2012 taxes to reflect this change.
Depending upon your income and the retirement plan you have at work, you may be able to deduct your IRA contribution and receive an additional refund.
If you have already maxed out your 2012 IRA, get a jump-start on 2013 and make your 2013 contribution now.
3. Boost Your 401k
Deposit your refund in an interest-bearing account. Go to your H.R. and adjust the portion of your paycheck that goes to your 401(k) by the refund amount. Then compensate for the extra bite out of your salary by doling out the dollars from the refund. This is an especially good idea if your company matches your 401(k) contribution.
4. Give Yourself a Raise
Why lend your hard earned money to Uncle Sam interest free every year?
Talk to your company's administrator about adjusting your W-4 form so you get to keep more of your paycheck.
Just be sure to do something as smart with the extra cash as you did with your refund-maybe set up college funds for the kids or take on a home improvement project.