Don't Mess With Taxes

You'd think we'd be used to a late filing season by now. It's happened several times, including last year.

But if you're getting a refund, it's hard to be patient. You want your tax cash back from the Internal Revenue Service ASAP.

I understand your frustration (in theory; we usually owe Uncle Sam just a bit). But chill out for just a while longer. Some refund patience could save you money and possibly prevent even more tax hassle.

Early refund options have costs: I'm talking about the tendency for some folks to seek other avenues for their tax refund money.

Tax refund loans, known as RALs, used to be popular even in years when filing season started on time. The loans were based on your expected refund and generally obtained through tax preparers. But consumer advocates, nagging personal finance bloggers and state attorneys general have essentially put RALs out of business.

Still, other permutations, from refund anticipation checks (RACs) to other loans based on expected tax refund amounts, such as from businesses trying to get you to buy some of their products, are still around.

Think twice before you get one of these tax-related financial products.

Early e-filing still means a wait: Yes, I know that it's still more than two weeks until Jan. 31, the day the IRS will start processing returns and their associated refunds.

That end of month date holds even if you're filing starting tomorrow, Jan. 17, using Free File. In this and other already e-filed tax instances, your return is done but in a holding pattern until the IRS begins doing its part on Jan. 31.

But getting a refund-related loan or similar financial product is, for many, one of the 5 stupid tax mistakes you want to avoid this and every filing season.

Here's what Steve Bucci has to say in today's Daily Tax Tip:

Tax refund products are advertised heavily at this time of year. What the advertising does not tell you about are the fees and steep interest rate associated with that short-term loan. Depending on fees and the amount of the refund, a finance charge can be the equivalent of a 100 percent annual percentage rate. Also, don't forget this is a loan; if the IRS turns down any deductions or credits on your return, you will still be responsible for the full amount of the loan.

Beware tax refund offsets: Pay special attention to that last sentence. If you don't get the exact refund amount you're expecting, you'll owe more than you bargained for.

This does happen. You have a federal or state obligation, such as a student loan payment or child support, that you forgot about.

That oversight turns into more than just "oops." These governments offset those debt amounts against your refund.

So take a deep breath and wait a bit longer to e-file your return through Free File or other low-cost tax-help options such as VITA.

If you have a bank account, have it directly deposited. That way you should get your refund by mid-February without any additional costs or worries.

Prevent future refund delays: Then head to your payroll office and adjust your withholding.

Your goal is to get the amount of income tax taken out of your paychecks as close as possible to your eventual tax bill.

That way you'll have your tax cash in hand all year long and not have to worry about Uncle Sam being slow in processing your future returns and refunds.

You also might find these items of interest:

• What to do if your tax refund is wrong
• The many ways a refund can go astray
• 5 productive ways to spend your tax refund