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During tax season you will hear many businesses offering to help you file your return. The question is, "Do I really want a car dealership, pay day loan store or rental store to complete my tax return?"

Questions you need to ask:

• Does the person preparing your taxes have the special knowledge needed?
• Is the person preparing your return accurately? Will a bigger refund mean more profit to the store?
• Will the person preparing your taxes share the information with the business they are located in?
• If the car dealership knows how much your tax refund is going to be, who has an upper hand in negotiating a price for a new car or used car?  Not you!
• Are they offering you a loan against your refund? (If so, be sure to read Another Pitfall below!)
  

A Better Alternative...

Go to a free tax preparation site, file electronically and get your refund directly deposited to get your money in as little as 10 to 15 days.  Only you will know how much money you have in the bank. Your bargaining power will be greater.  

Another Pitfall
Refund anticipation loans are another bad idea. These are extremely high interest loans. If you get a refund anticipation loan, you will only get your money a little sooner then if you waited and filed your taxes electronically with direct deposit.

Some tax preparation companies are now offering loans based upon your last pay stub of the year. These are still an expensive option.  Your loan is based upon an estimate of how much you are going to get back for a federal refund. If the tax preparer is wrong and you get a smaller refund, you will owe them the difference.

Unless you are in dire circumstances and there is no other viable option, you should wait!

You are getting a Big Refund, Now What?

Spend? Spend? Spend? No!
Prioritize! Prioritize! Prioritize!

Things to Consider:

• Necessities first-Rent, Utilities, Medicine and Food. If you are behind, catch up on these essentials.
• Debt Reduction-Prioritize higher interest rate loans first or ones with high penalties for late payment. Pay more than your minimum payment. Over time this will save you a great deal of money.
• Reliable Transportation- In Iowa, this might fall into category one. Consider getting that routine maintenance that you have been putting off. If you need a newer car this may be a good way to pay for it  without taking on new debt.
• Asset Building-Your dream of owning your own home may be closer than you think. Stick this money in a savings account or certificate of deposit. The State of Iowa and many towns have matching programs for down-payments for first time home buyers. Find out what your community has to offer.
• Emergency Fund-Next time you have an unexpected bill, this refund money can give you a real hand. 

Plan for Next Year
See the resource Big Refunds! A Bad Thing?. It will tell you how you might be able to get a boost in each paycheck. Reduce your monthly withholding and hopefully reduce that painful dry spell between paychecks.

Unfair, misleading and illegal lending practices can cause big problems for low-income Iowans. Look at the consumer law resources on the website iowalegalaid.org for details. Providing help with these issues is a priority for Iowa Legal Aid. Call 1-800-532-1275.

The information in this article was not intended or written to be used and cannot be used to avoid penalties under the Internal Revenue Code.