FOR IMMEDIATE RELEASE
Contact:
Kelly Rote
Kelly.Rote@moneymanagement.org
713-394-3201
HOUSTON (January 28, 2005) – When it comes to Americans, William Shakespeare’s admonishment to “neither a borrower nor a lender be” apparently falls on deaf ears. The American love affair with borrowing is well documented. But, did you know that there are at least 85 million lenders in the 50 states?
If you’re getting a tax refund this year, you are
one of them. A tax refund, in essence, means that you gave Uncle Sam an
interest-free loan for the preceding calendar year. The average tax refund is
about $1,500, and that is a lot of money.
“When was the last time someone gave you an interest free loan?” asked Kelly Rote, spokesperson for Consumer Credit Counseling Services (CCCS), a nonprofit organization that provides debt and credit counseling and education. “Ironically, some of the people getting these refunds may be the same people who are paying interest on credit cards.”
Uncle Sam, on the other hand, isn’t so generous. Request an IRS installment plan to pay your federal income taxes, and you will be charged a user fee of more than $40 and assessed interest.
If your tax refund exceeds $500, consider reducing the withholding on your W-4. You could put the additional money in an interest paying savings account. You could use it to pay down an outstanding credit card balance. You could also use it to fund an individual retirement account.
If you are one of the many Americans expecting a tax
refund, here are tips from CCCS Southwest on how to make the most of it.
·
Choose tax preparers
carefully.
If someone promises you a big refund without first reviewing your finances,
something is wrong. Remember that you are responsible for any
misrepresentations on your 1040 regardless of whether or not you made the
mistake.
·
File electronically. E-file and you will have
your refund within three weeks. With E-file tax software and a personal
computer, you can file electronically from home. You data will be routed
through an IRS approved e-file transmitter. There may be a charge. You may also
e-file with a commercial tax preparer that offers e file.
·
Reserve refund anticipation
loans for emergencies. Is it worth $30 to $300 or so to receive your refund several weeks
early? If it is, be sure to compare rates and to read the terms of the loan
carefully. These loans are typically offered by tax preparation services.
·
Put your savings in interest
paying accounts. Fearful that they will spend the money, many Americans use their W-4s
to stash money for car insurance and property taxes. If they were to place this
money in an interest-paying certificate of deposit, they would still be able to
pay their bills and have some additional money.
·
Review your W-4
periodically.
If you are expecting a child and could soon be eligible for a child tax credit,
be sure to adjust your W-4. Otherwise, you will be asking Uncle Sam to hold a
lot more of your money than he needs. If your refund exceeds $500, it could be
time to adjust your W-4 or Employee’s Withholding Allowance Certificate.
Unless you are interested in a career as a small
time lender, be sure to adjust the allowances on your W-4 properly. You work
hard for your money and should get to enjoy the fruits of your labor year
round.
About Money Management International
Consumer Credit Counseling Services (CCCS), a division of Money Management International (MMI), is the nation’s largest non-profit, full-service credit counseling agency, providing confidential financial guidance, counseling and debt management assistance to consumers since 1981. CCCS helps consumers trim their expenses, develop a workable spending plan and repay debts. Counseling is available by appointment in branch offices and 24/7 by telephone and Internet. Services are available in English or Spanish. To learn more, call 800-762-2271 or visit MMI's website at www.moneymanagement.org