Taxes and Technology
April showers bring May flowers, as the old saying goes. For most of us, April also brings the dreaded date of April 15—the deadline for personal income tax filings with the Internal Revenue Service.
Thanks to today’s technology, taxpayers have several options. The techo-tax revolution began a few years ago with new software packages, such as TurboTax, reducing the long, cumbersome process of completing tax forms. Now Internet filing and electronic payments are commonplace.
Several software packages with similar features are available. Before purchasing, read carefully to ensure the software meets your needs. Most importantly, be sure it is up to date with all of the latest changes in the law. Having the most current version of the software should ensure that you have the latest updates. It’s important to purchase a reputable brand which shouldn’t be difficult as knocks offs are few.
The number of Americans using credit cards and electronic withdrawals to pay their taxes continues to rise, primarily due to the convenience and acceptance of e-commerce. Credit card payments can be made by phone, online, or when e-filing. Generally, taxpayers can make a payment using American Express, Discover Card, MasterCard, or Visa. Keep in mind, however, that there is an additional convenience fee for credit card payments when using one of the IRS-authorized filing services.
Using credit cards to pay offers several advantages and disadvantages. It is convenient, allows card holders to accumulate points for frequent flyer miles or other awards, and defers the payment a bit longer. On the other hand, card holders will pay additional interest on the amount charged if not paid in full when the credit card statement arrives. Electronic withdrawals may also include fees from your financial institution. While offering the same convenience as credit card payments, electronic withdrawals will not result in additional interest payments because the funds are directly paid from a checking account.
A refund can be a good way to start or add to a family savings account, emergency fund, IRA, or college savings plan. It’s also a great opportunity to pay down credit card debt, make an extra car payment, or pay on other outstanding debt. Getting a refund means that you have overpaid the federal government, and Uncle Sam has used your money interest-free. Even though it may be exciting to get a big refund, it makes more sense to visit with a tax specialist to find ways to reduce the amount of taxes you’ll pay in the future—increasing your monthly income.
Refunds may be tracked online at the IRS website. If you don’t receive your refund within 28 days from the original IRS mailing date shown on the “Where’s My Refund?” tab, you can start a refund trace online. For more information, visit IRS.gov.
A Final Word
Tax time also increases the potential for “phishing,” a scam where Internet users send spam or pop-up messages to obtain personal and financial information from unsuspecting victims. Protecting yourself on tax matters is relatively easy—never respond to emails asking for personal information. If the IRS wants to contact you, it will send a letter—not an e-mail.
Sue Lynn Sasser, PhD, is an associate professor of economics at the University of Central Oklahoma. In addition, Dr. Sasser serves as executive director of the Oklahoma Council on Economic Education and director of the UCO Center for Economic Education. She is past president of the Oklahoma JumpStart Coalition for Personal Financial Literacy. She lives in Edmond, with her dog Lily.