Family, Youth & Consumer News
Look for tax relief when filing returns
By Bonnie Coblentz
MISSISSIPPI STATE -- Americans are conditioned to dread taxes, but for some working Mississippians, tax time can bring a bonus check or some hurricane-related tax relief.
Bobbie Shaffett, family resource management specialist with the Mississippi State University Extension Service, said the Earned Income Tax Credit can be a big help to many taxpayers.
“Low- and moderate-income workers and those who lost income or jobs because of Hurricane Katrina may be eligible for the Earned Income and Child Tax Credits on 2005 tax returns because of reduced income last year,” Shaffett said. “Refunds can mean more than $4,000 extra for eligible families who meet income and family size guidelines. This tax credit can be especially helpful to those who can only find work in part-time, temporary or low-wage jobs.”
The amount of the refund depends on the amount of wages earned and the number of children living in the home. For example, a worker who earned less than $35,263 and who raised more than one child in the home can get a credit up to $4,400.
Shaffett said this tax credit reduces the tax burden on workers, supplements wages and provides a work incentive. It is a refundable tax credit, meaning it can reduce a worker's tax bill and any remaining credit is paid as a refund.
Shaffett said the credit can amount to a 40 percent raise, turning a $6 an hour job into an $8 an hour job. The average working family who qualifies can expect about $2,100 from this tax credit. Taxpayers must apply for this credit when filing their annual tax returns.
Taxpayers who suffered losses from Hurricane Katrina may find some tax relief offered by the Gulf Opportunity Zone Act of 2005 and the Katrina Emergency Tax Relief Act of 2005.
“The Internal Revenue Service gave eligible taxpayers living in Mississippi when either hurricane Katrina or Rita hit a variety of tax relief measures, including deductions for storm losses,” Shaffett said.
Susan Cosgrove, Extension area family resource management agent, cautioned taxpayers to stay away from any kind of fast tax refund offer that is actually a loan.
“Advertisements for quick tax refunds are everywhere we turn now,” Cosgrove said. “This is another situation where smart consumers should remember that if something sounds too good to be true, it probably is. You cannot expect something for nothing.”
Most offers of “super fast cash,” “instant money” or “fast cash refunds” are actually loans - most of them high interest - that must be repaid when the refund actually arrives from the IRS. According to the Consumer Federation of American, taxpayers spent $1.4 billion unnecessarily in 2003 on refund anticipation loans.
“Taxpayers who file an electronic return can request that their refund be deposited directly into their bank account. This usually takes just a week to 12 days,” Cosgrove said. “If consumers do not have a bank account, they should consider setting one up to take advantage of direct deposit. Waiting a week or more can be a wise decision when you consider that refund anticipation loans and check cashing fees can easily add up to $100 or more.”
Free tax filing assistance is available to limited-resource individuals. More than 50 Volunteer Income Tax Assistance sites will file taxes for free for qualified individuals. In some instances, taxpayers may be eligible to receive free savings accounts from local banks, making it possible for them to have their tax refund directly deposited into this new account. Call (800) 829-1040 to find the nearest location.
For more information on tax refunds and Katrina tax relief, contact the local Extension family resource management area agent.
Released: Feb. 2, 2006