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The Truth About Refund Anticipation Loans  by Tara

February8

It’s that time again – TAX SEASON! What tipped me off? Certainly, it could have been the Statue of Liberty standing at the corner flailing her arms around, encouraging me to pull on in to get my taxes done.  Or perhaps it was the 7,000 commercials peppering my television screen. But, honestly, guys, it was anticipation of that fat refund check that got my blood a-pumping. I’m sure many of you are picking up what I’m putting down! 

Christmas is over – the visions of sugar plums dancing in my head have been replaced with visions of TVs, basement remodels, a new laptop and other random things that have been on my “want” list for quite some time. With the help of Uncle Sam, I just might be able turn one of my visions into reality (the holdup will be my spreadsheet loving husband). 

For other people, you may want to use your tax refund to pay off credit card or medical bills, apply extra to a home or auto loan, or perhaps your tax refund will simply just help you stretch to another month. 

Many tax preparation places offer refund anticipation loans (also known as RALs). It means that you’ll receive you tax refund immediately (technically, it’s a loan from the tax preparer), but at a “small” cost to you. In the heat of the moment, this may seem like an amazing opportunity! Just slow down for a minute and think it through. We’re all old enough to know that all that glitters is not gold, and often times these refund anticipation loans tend to be put in that category. 

A 2006 study by the Consumer Federation of America found that “based upon the prices for RALs in 2006, a consumer can expect to pay about $100 in order to get a RAL for the average refund of about $2,150 from a commercial tax preparation chain this year.” $100? Seriously?? Just imagine how much someone who received a larger refund would have to pay! Eek! 

Examples help me understand these things better, so let’s set the scene: Hilary goes to get her taxes done. She finds out that she is going to be the lucky recipient of a tax refund. Yippee, Hilary! Hilary can choose to either 1) wait up to 3 weeks to receive her money from the government OR 2) walk out of her tax session today with her money by getting a refund anticipation loan, less a percentage of her tax refund and associated fees.  What should Hilary do? 

My personal advice to Hilary is to just hold out the 3 weeks (though usually it’s less time if you choose to have the monies direct deposited into your Linn Area account). I don’t know about you, but I can think of A LOT of things that I could do with $100!

So sound off below, what do YOU think Hilary should do? Are refund anticipation loans worth it?

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Free Tax Preparation  by Tara

February2

If you made $50,000 or less total household income in 2011, we want to make you aware that you may qualify for free tax assistance. The helpful folks at the United Way connect people in need with volunteers through their Volunteer Income Tax Assistance program, or VITA. IRS certified volunteers help prepare both federal and state tax returns for you completely FREE of charge.

That’s right…

F-to-the-R-to-the-double-E!!!! 

In 2011 alone, VITA sites in the United Way of East Central Iowa service area generated a total of $2,263,243 in federal refunds. Wow! There are multiple VITA locations in Cedar Rapids. (Quick side note – you can find out more about locations and set up an appointment by dialing 2-1-1.) 

According their website (click here), the VITA program promotes awareness of the Earned Income Tax Credit (EITC) – a refundable federal tax credit that helps low to moderate income individuals offset taxes, supplement low wages, and provide a work incentive. If you qualify for the EITC, you may be eligible for a maximum credit of: 

  • $5,751 if you have three qualifying children
  • $5,112 if you have two qualifying children
  • $3,094 if you have one qualifying child
  • $464 if you have no children 

Check out this video about one recipient’s experiences with VITA:

For more information or to schedule an appointment, just dial 2-1-1 or go to www.unitedwayofeastcentraliowa.org/taxhelp. It’s definitely worth a few minutes of your time to find out if this FREE service can save you money!

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Win $529 on 5/29 with 529s  by Matt

May25

There are lots of dates that combine to make outrageous days that the “world recognizes” (thanks to the internet of course). There is Star Wars Day (May the 4th), Talk Like a Pirate Day (September 19th, mateys!) and even Mole Day (October 23rd from 6:02 am to 6:02 pm; it’s a chemistry thing).  But I have one to tell you about that may seem silly, but can make you some sweet moolah back on your taxes and help you save for the education of yourself or your family. You ready for this? 

May 29th (529) is 529 Savings Plan day!  Wondering what that is?  Well, guess what!  I know.  It’s a program offered through the state of Iowa that promotes educational saving.  You can deposit money monthly, quarterly or whenever you feel like it really. You can then withdraw the money when it’s time to pay the tuition bill for yourself, your kids, your grandkids, your nieces or nephews – it’s really that flexible!  Note, this requires rearranging the account to add the person that you’re giving the money to as a beneficiary and fancy stuff like that, but it’s easy to do and you can switch it at any time! 

I’m no tax expert, but I can tell you that you’re able to deduct up to $2,865 from your adjusted gross income when filing your state tax return…so that’s going to save you money! (Be sure to check with your tax consultant for details about qualification!)

I can speak from experience, folks. I actually set one of these suckers up for myself back in February! I’m using it as a place to save to pay my tuition for my continuing education. I found that it was actually ridiculously easy to set up. Only took me about 6.25 minutes! The only thing easier than setting my 529 up is maintaining it.  I’m actually excited for tax season next year so I can earn some extra green back!

I can tell you with complete confidence that this is something you want to look into if you are in school, may go back, have a kid or grandchild you want to help with school, or just might have a kid some day!  

Aside from all this awesome stuff, until the end of the month (May 31st), the state is offering a chance to win $529 (clever right??) in a drawing done for those who register a new account.  For more information, go check out http://www.collegesavingsiowa.com/ and look for this image:

Tax Time: Thank Honest Abe for 3 extra days!  by Tara

March2

It’s been the buzz of all the elite social circles in America. You can hardly turn on the news without hearing about it. That’s right, citizens of the United States of America – the tax deadline in 2011 has been extended to April 18th. Sound the trumpets!!!

I know that there has been some confusion as to WHY the date has shifted from the standard deadline of April 15th. I’m here to help clear up the mystery and give you a tiny history lesson all at the same time!

The IRS is required by law to adjust the tax deadline if it falls on a holiday or a weekend. Hmmm, but according to my calendar April 15th lands on a Friday this year and I wasn’t aware of a holiday… Well, friends, this year the good folks in Washington D.C. will be celebrating Emancipation Day on Friday, April 15th therefore constituting that particular day a holiday (a D.C. holiday, not a federal one – so YES , Linn Area Credit Union WILL be open!). You see, normally Emancipation Day is on April 16th, the day in 1862 when President Lincoln signed the Compensated Emancipation Act, but this year they’re observing it on the 15th. Clear as mud? Yeah, for me, too.

As much as I enjoyed history class, I have to be honest and tell you that many things have failed to stick with me into my late twenties. The compensated Emancipated Act hyappens be one of those things. (Clearly, I’d fail miserably if I ever went on “Are You Smarter Than A Fifth Grader?”.) A quick Google search directed me towards my friend Wikipedia. Here’s the scoop:

The municipality of Washington, D.C., celebrates April 16 as Emancipation Day. On that day in 1862, President Abraham Lincoln signed the Compensated Emancipation Act for the release of certain persons held to service or labor in the District of Columbia. The Act freed about 3,100 enslaved persons in the District of Columbia nine months before President Lincoln issued his famous Emancipation Proclamation. The District of Columbia Compensated Emancipation Act represents the only example of compensation by the federal government to former owners of emancipated slaves.

On January 4, 2005, Mayor Anthony Williams signed legislation making Emancipation Day an official public holiday in the District. Each year, a series of activities is held during the public holiday including the traditional Emancipation Day parade celebrating the freedom of enslaved persons in the District of Columbia.

But what does all of this mean for you and me? Taxes won’t be due until Monday, April 18th. If you are due a tax refund, I’d file as soon as possible so you can get your own money back. If you owe taxes, you might be welcoming this opportunity to drag your feet just a couple of days longer!

Tell us – are you expecting a big tax return this year? What are you going to spend it on???

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