Do Not Pay to Get Your Own Money

For many working households the tax refund is the largest single cheque of the year. It is also the moment an entire industry exists to take a cut of, and almost none of that cut is necessary.

VITA, the IRS Volunteer Income Tax Assistance program, provides free tax preparation by trained and certified volunteers for households under an income threshold. It runs at libraries, community centres and churches, and many sites now handle self-employment and gig income too.

IRS Free File offers free online filing for those under an income limit, and free fillable forms above it.

Both are free in the actual sense of the word, not free-to-start.

Refund anticipation loans and advances. These are loans against money that is already yours and is already coming. They are frequently advertised as no fee, with the cost sitting in preparation charges, account fees or a prepaid card.

The honest comparison: e-filing with direct deposit typically returns your refund in a matter of weeks. A refund advance buys you those weeks and charges for them.

Fee-from-refund arrangements, where preparation costs are deducted from the refund. This usually involves setting up a temporary bank account and its own fee, and it is how a cheap-sounding preparation ends up considerably more expensive.

Prepaid card refunds, which carry maintenance and withdrawal fees. Direct deposit into your own account is free. If you do not have an account, open one before filing.

“It is your money, it is already coming, and the only thing on sale is impatience.”

The Earned Income Tax Credit is worth up to several thousand dollars for working households with children, and a smaller amount for workers without children. Millions of eligible people do not claim it every year.

The usual reason: income low enough that no filing was required, so nobody filed. But the EITC is refundable, which means you receive it even if you owe no tax, and you have to file to get it.

Also check the Child Tax Credit, the Child and Dependent Care Credit if you paid for childcare so you could work, and education credits.

This is the part that surprises people. If you missed a credit you qualified for, you can file an amended return for up to three prior years and claim it.

A VITA volunteer can look at old returns and tell you. For a household that has been eligible for the EITC and not claiming it, that is a genuinely large amount of money sitting in the past.

And while the documents are out, check the other benefits the same paperwork qualifies you for.