Avoiding the Slings and Arrows of Tax Time

Read this in: Spanish / Español


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
Almost everyone looks forward to a big refund each year. Should they? Probably not! A big refund means that the IRS gets to keep your money without paying you interest. Money you might need this month is going to Uncle Sam instead. There is a way that you might be able to boost your take home pay.

Big refunds can be the result of claiming too few allowances on your W-4. To figure out how many allowances to claim you can go to the IRS Withholding calculator on line at https://www.irs.gov/payments/tax-withholding

If you are allowed to claim more allowances, less tax will be withheld from your paycheck. Your monthly take-home pay will go up.

Iowa Legal Aid provides help to low-income Iowans. 

To apply for help from Iowa Legal Aid:

  • Call 800-532-1275.
  • Iowans age 60 and over, call 800-992-8161.
  • Apply online at iowalegalaid.org
If Iowa Legal Aid cannot help, look for an attorney on “Find A Lawyer” on the Iowa State Bar Association website iowabar.org.   A private attorney there can talk with you for a fee of $25 for 30 minutes of legal advice.
As you read this information, remember this article is not a substitute for legal advice.
Last Review and Update: Jul 20, 2023
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