Before tax season starts, there are some facts you should know about sources of free tax preparation help and refund anticipation loans.

Tax Preparation

There are several ways to have your income tax return prepared for you for free. They are explained below.

Free File

The IRS Free File program makes tax software programs available to eligible taxpayers for free. To be eligible for this program in 2007, taxpayers must have earned $54,000 or less. The Free File software programs will help you complete your income tax return and will then file the return with the IRS for you at no cost. The software programs given to eligible taxpayers are the same tax programs that are sold in stores.

You can get Free File only through the IRS Web site. Free File will be available beginning in mid-January 2008. The IRS.gov Web site will have a list of tax software company Web sites and complete instructions to help you with filing your federal return online. Review the list of tax software companies and select one that best suits your needs. Once you select a company link from the list, you will be notified that you are leaving the IRS.gov Web site. You will be taken directly to that company’s Web site to begin preparation of your federal income tax return. Remember, you must access the company through the IRS.gov Web site, beginning in mid-January 2008.

As you start using the program, you will be asked a series of questions. Using your answers to these questions, the program will prepare your return and calculate your taxes and refund. When you are finished answering the questions and your return has been prepared, your return will be automatically electronically filed.

Most people receive their refund within 10 days of using the Free File program.

The Free File program will only help you with your federal income taxes. You may consider one of the options below for your state income taxes.

Volunteer Income Tax Assistance (VITA)

In New Jersey, there are many Volunteer Income Tax Assistance (VITA) sites around the state. The VITA sites are staffed with people who can help prepare your income tax return for free if your income is $40,000 or less. To locate the site closest to you, call 1-800-TAX-1040 or go to the IRS Web site, and type in the words volunteer income tax assistance or vita. The sites also have all the tax forms (1040, 1040EZ, etc.) and instructions you may need to prepare your return.

Volunteer Tax Programs for Members of the Military

The military also has a special program known as the Armed Forces Tax Council (AFTC). The AFTC coordinates access to free tax assistance at VITA sites for military personnel and their families. Volunteers at these sites are trained to address tax issues specific to the military. Also visit Tax Information for Members of the Military (from the IRS).

IRS

If you have questions about preparing your tax return or about your refund, you can call the IRS at 1-800-829-1040 or 1-800-829-4933. The IRS does not charge for any help it may give you. The IRS will also send you free copies of any forms you may need.

Tax-Aide

Tax-Aide is a program sponsored by the Association for the Advancement of Retired Persons (AARP) that provides tax services free of charge to middle- and low-income people of all ages. To find the Tax-Aide office closest to you, call 1-888-AARP-NOW or go to the AARP Tax-Aide Web site.

Social Service Organizations

Many social service organizations do outreach and run programs that will prepare your income tax return at no cost and will then electronically file your return for you.

Your Local Library and the Post Office

Your local library and the post office have copies of all forms that you may need to complete your tax return. The forms are free.

There should be absolutely no reason to pay to have your taxes prepared for you. The above sources give you a way to keep your money and still file your return and get your refund.

Refund Anticipation Loans

Refund anticipation loans are special types of loans that have very high interest rates. A refund anticipation loan is made to you in an amount equal to or less than the amount you will get from the IRS as a tax refund.

You must pay back the money you have borrowed through a refund anticipation loan. You will also have to pay interest, which can range from 50% to 700% of the loan amount. Instead of keeping your entire refund, you will have to turn over the refund and the interest to the lender.

If the IRS does not agree with the numbers on your tax return and does not refund the amount of money you anticipated, you will still owe the lender the full amount you borrowed and the interest on that amount.

Refund anticipation loans are not that much quicker than waiting for the refund from the IRS. If you file electronically, the IRS can send your refund to you within 10 to 14 days. Even if you do not file electronically, you should receive your refund in a few weeks. To check on the status of your refund, contact the IRS at 1-800-829-1040 or go the IRS Web site.

This article is from the December 2007 issue of Looking Out for Your Legal Rights^®.