Making Tax Time Pay: How to Claim and Keep the Money You’ve Earned
by Meg Newman
Did you know that taxpayers leave $2 billion dollars in tax benefits unclaimed? Is some of this money yours? Free tax assistance is available for income-eligible workers at convenient locations throughout DC. Avoid costly preparer fees and take advantage of fast, free electronic tax filing, beginning in late January!
How can filing my taxes help me?
The Earned Income Tax Credit (EITC) is a unique tax credit for people who work. According to the Center on Budget and Policy Priorities, in 2006, 47,536 working families and individuals in DC claimed the credit—returning nearly $84 million to DC, with an average refund of $1,745 per household—equal to more than 10% of the filer’s annual income. Yet one of every five or six people who qualifies for the EITC doesn’t claim it—either because they don’t know about it or can’t or don’t file their tax returns—potentially losing out on thousands of dollars that they may be owed.
Even if you don’t qualify for the EITC, you might also be due a refund because you qualify for other credits and deductions or had too much taken out of your paycheck during the year. Many people who aren’t required to file should file to get a refund. The only way to know for sure if you are one of these people is to complete your tax forms.
Where can I get free tax help?
Throughout the filing season, the DC Earned Income Tax Credit (DC EITC) Campaign operates sites across the region that offer free tax preparation and other services. Individuals with income below $22,000 and households with total income below $40,000 can go to a free tax site to get help completing their tax forms. A full list, map, and searchable database of these free tax sites is at www.dceitc.org/findasite. Your return will be prepared quickly and filed electronically to expedite your return check. It will also be reviewed several times to ensure accuracy prior to transmittal.
What’s the catch? How do you offer this great service for free?
The Campaign is able to operate thanks to more than 600 community volunteers who receive extensive training to provide this service to the public. They are overseen by tax professionals well-versed in tax benefits for low-income filers and when there is a particularly complex return, the Campaign can link taxpayers to additional resources in the community. If you or someone you know is interested in registering with the Campaign as a volunteer and participating in training, visit http://www.dceitc.org/signup. Spread the news about this unique volunteer opportunity – no experience is required!
Do tax sites offer other financial services?
Many neighborhood tax sites will offer asset-building resources in addition to tax filing. Some sites will allow customers to enroll in no-fee bank accounts on-site. Others will offer free credit counseling services, unique savings opportunities, and information about benefits that can increase families’ economic security. Visit www.dceitc.org for information about our “Super Saturdays” throughout tax season as well as other resources. Mark your calendar now for the DC Saves Financial Fair at THEARC on April 5, 2008!
I’m ready for my refund check now! Why shouldn’t I get my taxes filed early through a paid preparer?
Refund Anticipation Loans, or RALs, are a pricey and dangerous way to get money quick. These loans are made against an anticipated tax refund. If the refund doesn’t come through as expected or is garnished, then the taxpayer must repay the difference, plus the hefty interest rate (last year these rates ranged from 58% to 125%). Pay stub and Holiday RALs are especially risky because there is an increased chance of miscalculating the refund. Using a December pay stub alone, the preparer has no way to know what other income may affect the tax return – income, for example, from unemployment insurance, or another short-term job. Don’t get caught in this trap! Filing your taxes electronically and using direct deposit can get your refund back to you within 7-10 days of filing—and you can avoid extra check-cashing fees and even direct deposit your refund in up to three different accounts.
This regular financial column is presented by Capital Area Asset Builders. Send questions or feedback on this article to saving@caab.org. For more information about free tax filing options and tips on how to choose a paid preparer wisely, visit www.dceitc.org/howtofile.
