3 Tips To Prepare For Tax Season With A Low To Moderate Income
When tax season starts looming, some people are excited because they generally receive a refund, while others experience dread because they usually owe money. Regardless of your situation, you need to be mindful of the best approach to filing taxes, especially when you do not have disposable income.
Find A Prepaid Card
Many people with lower incomes do not have a bank account because it can be difficult to find a checking account without monthly fees. With a checking account, you might spend money to cash paychecks, and you will slow-up the refund process each tax year. Fortunately, there are many prepaid cards available you can use for direct deposit of your paycheck and tax refund. You will need to be careful about the prepaid card you choose to avoid any with exuberant monthly fees and limited access to reload your card or use the ATM. Generally, you will have better luck with prepaid cards you can purchase at a local store because you can often add money to them at the cash register. Make sure the prepaid card you choose also has an account number and routing number so you can use it like a checking account. If there is a monthly fee for using the card, weigh it against any fees you pay for check-cashing to see if you save money.
Avoid Refund Advances
If you will receive a tax refund, it can be especially tempting to use a refund advance when your income is limited. Unless you have a true emergency, there is little benefit in receiving your refund in advance. Of course, this service comes with a price and it can be hundreds of dollars depending on the service. Since most tax returns are submitted electronically and are direct-deposited into bank accounts, the time-frame for receiving your refund is not lengthy. You also have to consider what will happen if there are problems with your tax return and you receive a refund advance. If there were any missteps, such as errors or you are audited by the IRS, it may be impossible for you to pay back the money to the tax preparation service.
Know When To Pay For Tax Preparation
Even if you are in a lower income bracket, there may be situations where it is in your best interest to pay a tax professional a reasonable fee. If you own a business or are otherwise self-employed, your taxes can become complicated quickly. Most free tax services, such as those offered by the IRS or online, generally work well if you are an employee or are self-employed and have some familiarity with tax rules. When you are self-employed, you need to be certain you are taking the right deductions to avoid over- or underpaying taxes, especially when your income is low. Additionally, since you may not have obvious receipts and records, especially if you work online, you may find it is better to avoid deducting certain expenses than risk being audited.
Tax season is complex, especially if you have a limited income and are trying to avoid unnecessary expenses. Knowing where to save money on your tax prep can help you avoid costly mistakes each year. For more information, visit a website such as http://www.tri-check.biz.