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March 2005

The 2005 Tax Season is Here!

   Even though the federal and state income tax returns seem to get more complicated each year, the IRS and the Wisconsin Department of Revenue are working to make the filing process easier for millions of taxpayers.

   Free Filing of Your Taxes

   According to the Wall Street Journal, 19 tax-software and online tax preparers are providing free software and electronic tax-filing services. However, you must be sure to link to the company’s web site through the www.irs.gov web site. If you link directly with the company’s web site, you may be charged a fee. Some companies such as Intuit and H&R Block are offering free services to anyone; other companies may limit who can use its free services by age or income level. You should check the company’s pricing policies and fees in the section marked “Before Getting Started.”

   Be aware that you may be offered other products and services for a fee. You have no obligation to buy the additional products or services. The IRS also warns the free offers may change as the tax-filing season advances towards April 15 because companies are allowed to change the terms of their offers. Some companies may limit who may take advantage of the free filing offer. Also, the free filing service may not be right for you if your return is complicated or you are looking for advice on how to minimize your taxes.

   In 2004, nearly 3.5 million federal returns were filed using the “Free File” program. For free filing of state tax returns, go to the “Free File” icon at www.wisconsin.gov.

Beware of Tax Refund Anticipation Loans

   The Department of Revenue (DOR) and the Wisconsin Department of Agriculture, Trade & Consumer Protection are warning consumers that some tax preparation companies and even some car dealerships are offering “instant” or “fast” tax refunds. Wisconsin Consumer Protection Bureau Director Jim Rabbitt warns that you may pay unnecessary fees and interest to receive an advance tax refund. He argues that most taxpayers who electronically file will receive refunds within several days of filing if there are no errors in the tax return. Rabbitt and DOR Secretary Michael Morgan note that those who use a “refund anticipation loan” will pay a high price to borrow their own money. According to the DOR, an average loan of $2,100 can carry associated fees of $225 or more. Also, if the refund is delayed for any reason, the consumer must pay back the loan as well as all fees, which often increase dramatically after 10 days. In 2002, Wisconsin consumers paid nearly $27.3 million in these types of fees, according to Morgan. I strongly recommend against taking these offers because they will likely cost you far more than you expect.

Copyright ©2005 Wisconsin Energy Cooperative News
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