sports 2 days ago

Tax experts suggest online deposit best way to file

The Gainesville Sun, Fla. — Cleveland Tinker The Gainesville Sun, Fla.

Jan. 13--Tax season will soon be in full swing, and if you're expecting a refund, how you file your taxes will likely determine how much you actually deposit into your bank account.

The tax season will officially begin Jan. 29 when the Internal Revenue Service begins accepting tax returns, and there are several things taxpayers -- especially those expecting a refund -- can do to file as efficiently as possible, said Jorge Ruiz-Menjivar, an assistant professor in the Department of Family, Youth and Community Sciences at the University of Florida.

Employers must provide employees with wage and tax statements no later than Jan. 31, Ruiz-Menjivar said.

Taxpayers should file electronically because it's a fast, safe and easy way to get returns processed compared with mailing returns. Also, using direct deposit almost guarantees you will have your refund in three weeks or less, and it's crucial to gather records ahead of time to make sure you claim credits and deductions you are entitled to, Ruiz-Menjivar said.

"The IRS issues more than nine out of 10 refunds in less than 21 days," Ruiz-Menjivar said.

He also encourages people to view the tax-time tips list on the IRS's website.

It's important for taxpayers to know the difference between two popular tax-refund related products: refund anticipation checks and refund anticipation loans, Ruiz-Menjivar said.

Refund anticipation checks are sent to financial institutions that disburse fees to tax preparers and the balance to the taxpayer, while refund anticipation loans are funds borrowed from a lender based on the taxpayer's anticipated tax refund, Ruiz-Menjivar said.

Refund anticipation loans became popular after electronic filing was established, and featured high interest rates and/or fees. They were commonly offered by tax preparers prior to 2010, and are still offered, but without the high interest rates and fees, he said.

Though the refund anticipation check method currently is the most popular way tax preparers file returns for clients, it's important people understand those checks aren't returned any faster than when using the direct deposit method, Ruiz-Menjivar said.

Charging interest and fees on refund anticipation loans has been banned since 2010. However, people should beware of tax preparers who still offer that method of tax filing and try to make profits by offering services clients may not need, such as acquiring credit scores and reports and audit protection services, Ruiz-Menjivar said.

People who hire tax preparers to file their taxes using the rapid refund method are usually charged between $25 to $60 for the preparer to set up the federal refund anticipation check, he said, citing the National Consumer Law Center.

The ban on tax preparers charging high fees and interest rates has no bearing on how much financial institutions can charge for rapid refunds, said Michael Perkins, owner of Perks Family Tax Service in Gainesville.

"The rapid refund process allows selected financial institutions to fund expected refunds prior to the IRS actually processing and releasing an expected refund," said Perkins, who received his practitioner tax identification number from the IRS in 2003. "Financial institutions take on the risk of the IRS not releasing the funds, and therefore they assess a significant premium for assuming that risk."

The rapid refund process is primarily used by those who can least afford it, and will be used by more of those kinds of people this year because the IRS won't begin releasing refunds until Feb. 27, Perkins said.

If taxpayers use the direct deposit system, they can save themselves a lot of money -- as much as $1,000 for some taxpayers who expect to get large refunds like $8,000 or so. In those cases, people are charged exorbitant interest rates by banks who offer rapid refund checks because of the risks they take offering the service. Some people may show they expect to get an $8,000 refund, but may owe the IRS more than that, and won't receive the refund. In order to help make up for those cases, the banks charge high interest rates, Perkins said.

To avoid paying those high interest rates for rapid refund services, people should have the IRS directly deposit their money into their bank accounts, Perkins said.

"In recent years, the IRS has processed and released some returns within approximately 10 days," Perkins said.

Important factors for taxpayers to keep in mind during tax season include understanding that by law the IRS can't issue refunds on tax returns claiming the Earned Income Tax Credit or the Additional Child Tax Credit before the middle of February, Ruiz-Menjivar said.

The tax season traditionally attracts people who try to take make a quick buck by posing as legitimate tax professionals, and the simplest way to find out if someone is a professional tax preparer is by verifying their practitioner tax identification number with the IRS, Perkins said.

"Tax preparation is a profession, therefore, the most efficient way to file a tax return is through a seasoned tax professional," Perkins said.

If your tax returns are filed by someone who refuses to sign the return saying they're the preparer, "that should be a red flag," Perkins said.

Taxpayers should make sure they understand what they are paying for when dealing with tax preparers because they have the right to "fair disclosure before agreeing to use any of the products" the preparer offers, Ruiz-Menjivar said.

Local taxpayers can take advantage of the free Volunteer Income Tax Assistance program offered by the United Way of North Central Florida by calling 211 beginning Jan. 29. The program will operate 10 sites in Alachua, two in Levy and one in Union counties, said Marilyn Renwick-Taylor, program coordinator.

Also, the United Way is seeking volunteer tax preparers.

* Tax season officially begins Jan. 29.

* Best way to file is electronically.

* 9 of 10 direct deposit refunds are made within 3 weeks.

* Verify practitioner tax ID number of your tax preparer.

___

(c)2018 The Gainesville Sun, Fla.

Visit The Gainesville Sun, Fla. at www.gainesville.com

Distributed by Tribune Content Agency, LLC.

AdChoices