Getting Down to Brass Tax:
True Tax Facts with DelCoAD
True Tax Facts with DelCoAD
April is upon us, and as if a shower-filled forecast isn’t enough to bring us down, Tax Day can, for some, appear a to be another storm cloud on the horizon. I am writing in hopes to debunk a few tax season myths and explain that tax season should be nothing to dread.
Myth: Tax Day = Doomsday
Tax Day, which usually falls on April 15th every year, has been pushed back to Monday the 18th due to Emancipation Day in Washington D.C. Most don’t realize that the April due date only ever applies to taxpayers who owe money to the IRS and not to those who are receiving refunds. This doesn’t necessarily mean you should dilly dally on claiming your refund though, because you are missing out on having that amount securely in your account and earning interest. If you do owe, you should do the best you can to pay in full by April 18th. If this is impossible, you can call the IRS at 1-800-829-1040 and work out a payment plan. They ask that you pay as much as possible but they are willing to work with what you are capable of. Explain your situation and ask them what you can do so that you don’t owe next year. If you are an employee who receives W-2 tax documents, this may involve changing the exemption amount on your W-4 to a higher number (ie. 1 instead of 0, which accounts for no federal withholding). If you are a contract worker or self-employed and you expect to owe over $1,000, you may want to consider filling out a form 1040ES and paying quarterly estimated taxes for 2011. Ignoring taxes won’t make them go away and the sooner you deal work with the IRS, the better off you will be
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Myth: “You have to spend money to make money,” or, alternately, “You can’t get something for nothing”
The average amount spent to have a tax return prepared is $183, which may not seem like a lot compared to refunds some receive upwards of $1,000, but it is certainly a lot compared to $0. That’s how much Volunteer Income Tax Assistance, or VITA, sites charge for their tax preparation services. On top of that, VITA sites offer free e-filing, state return preparation, direct deposit and referalls and access to other benefits. Delaware County Asset Development Group, or DelCoAD, runs nine free tax preparation sites in Delaware County and similar programs run free tax prep sites at thousands of locations in the surrounding counties and across the nation.
Myth: The IRS is out to get you
The VITA program is a collaborative effort between the IRS, organizations and coalitions like DelCoAD and its partners and volunteers from colleges, universities and the community. It serves to help low-income taxpayers access the credits for which they are eligible, specifically the EITC, or Earned Income Tax Credit. The guidelines for the EITC and therefore for the VITA eligible population, change every year. This year, VITA sites are qualified to help taxpayers and their families with a 2010 income of under $50,000. The EITC is a refundable credit, which means you can get more money back than just the federal income taxes you already paid--a lot more money. In fact, the EITC is considered to be the best anti-poverty tool in the United States. That’s because it can increase a household’s yearly income by a large percentage. See the below example and remember, this is not even including other possible credits, like the Child Tax Credit or education credits: A single parent with three children who earned $21,000 in 2010 is eligible for $4,702 of EITC, bringing his or her income up to $25,702. In this case, the EITC makes up over 18% of that family’s yearly income.
This chart shows the parameters for the 2010 tax year along with the maximum refund amounts:
Myth: You get what you pay for
Tax preparation at a VITA site is free but that doesn’t mean you get what you pay for. All VITA Volunteers are trained and certified in tax law by an IRS training program with an emphasis on obtaining all eligible tax credits. Most VITA programs, including DelCoAD, have additional training in customer service and asset development tools (savings bonds and prepaid debit cards, for example). All VITA volunteer-prepared returns are quality reviewed by an experienced volunteer through a process that the IRS has been honing for years. And then the tax software provides one last once-over before your return is submitted to the IRS. At VITA programs, quality is job number one and the client is our priority..
For more information: See www.delcoad.org for a list of our sites and their hours in Chester, Sharon Hill, Darby, Media and Holmes. You can also call me, Georgia Julius, at 610-543-5022 x228 with any questions or to find the nearest tax site to you. Have a Happy Tax Day!
*EITC limitations graph courtesy of PathWays PA
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