Taxpayer beware: Instant refund cards come with hidden fees

Expecting a tax refund this year?

Think twice about receiving it by way of an instant-issue, pre-loaded tax refund card. Some large tax preparers, such as H&R Block, market these cards to taxpayers who want access to their refund nearly instantly.

But there's a catch – it can cost you to access your money. And, unfortunately, many taxpayers don't realize this until it's too late.

"They call the card 'free,' but these companies charge an assortment of fees for cardholders to access their money," says Matthew Dodds, senior vice president of consumer lending at Dupaco Community Credit Union.

Stacey Hirsch, a teller services representative at Dupaco, says that in addition to your refund cash, the H&R Block cards carry a heavy load of fees, including:

• A $25 cash advance fee, regardless of whether you withdraw all of the money or a portion of it, every time you request an advance. "The best thing individuals should do is withdraw the full balance on the card, then we can put it in their savings account and they have it without (any more) fees," Hirsch says.
• A $2.50 fee, per transaction, to withdraw money at the ATM, in addition to the fee charged by the ATM. 
• A $1 denial fee if you try to withdraw a certain amount and it is denied. 
• A $1 balance inquiry fee to check on the balance remaining on your card.

"Unless they're using it for purchases, there's going to be fees for them to use their money," Hirsch says. "We've had people come in with $10,000 on their card. If you have that kind of amount, how do you keep track of what's on the card? If you do stop to find out, then you’ve got another $1 fee."

The best way to receive your refund is to wait for it to be direct-deposited into your bank account, where it's 100-percent free access to your money.

By Emily Kittle

Avoid common FAFSA-filing pitfalls

Sure, your family can fill out the Free Application for Federal Student Aid form without assistance. But the forms can be confusing.

Before your family sits down to file your FAFSA, do your homework to ensure that you're filling it out correctly. Brittania Morey, director of communication at the Iowa College Access Network, shares some of the most common pitfalls to avoid when filing the FAFSA:

• Time it right. The FAFSA should be filed as soon after Jan. 1 as possible and before the schools' priority filing deadlines. Your most recent federal and state tax records are needed. If necessary, tax and income information can be estimated, but the FAFSA will need to be updated once taxes are filed. "Every school has their own priority deadline. The biggest rule of thumb is you always want to meet the priority deadline rather than having your taxes completed," Morey says. "When families don't file by the priority deadline, it can hurt them."
• Know which assets count. Typically, the only assets you need to include on the form are checking and savings balances, personal investments and any additional real estate you own, not counting the house you live in. You don't need to include retirement income, such as pensions or 401(k) and Roth IRA accounts. If you are a business owner or farmer, call ICAN at 877-272-4692 for free assistance in determining whether you need to include that information on your form. 
• Use full legal names. The FAFSA is linked to the student's social security number, so it's important to use the student's full legal name, the way it appears on your child's social security card. 
• Answer questions as if you're the student. "Most of the time, parents are filling out the form for the student, but the form is written as if the student is filling it out," Morey says. "Sometimes parents make mistakes when answering questions about marital status. It's important to answer the questions as if you are the student."
• Choose your challenge question carefully. When you request your personal identification number (prior to filling out the form), pick a challenge question with an answer that isn't likely to change during the course of your child's college education. "The big mistake there is that people will forget the answer to their challenge question, so they lose access to their PIN number," Morey says. "It locks them out of the system and delays the process."

By Emily Kittle

College financial aid process begins with the FAFSA

The start of the year launched a new season for families with students attending college this fall: Welcome to financial aid season.

And with that comes filling out the Free Application for Federal Student Aid (FAFSA), which determines eligibility for federal and state financial aid.

"We recommend that every student fill it out, no matter their income status or whether they think they'll qualify for aid," says Brittania Morey, director of communication at the Iowa College Access Network (ICAN), "because not only do they not know what they could qualify for, but if they have to take out a student loan, the FAFSA is the only way you can get a federal student loan."

The free form is available from the U.S. Department of Education.

Not sure how to get started? ICAN, a nonprofit that provides support to students applying for financial aid, offers these tips:

1. Get PINs. Each student and at least one parent should request a personal identification number  prior to filling out the FAFSA. The PIN allows parents and students to sign the online form electronically and make changes later.
2. Be prepared. Several pieces of information for the student and the parent are needed: Social Security numbers, dates of birth and driver's license numbers.Most recent state and federal tax statements. W-2 forms and records of all income from last year (taxed and untaxed). Bank and investment statements. Farm and business records. Alien registration numbers for those who aren't U.S. citizens. 
3. File electronically. It's quicker than completing a paper form, reduces errors and speeds up processing time.
4. Repeat once a year. The FAFSA needs to be filled out each year students plan to attend college.
5. Ask for help. The FAFSA on the Web Worksheet helps families organize their information. You also can contact ICAN for free assistance; call 877-272-4692 to make an appointment for one-on-one help over the phone or in person at the Cedar Rapids College Planning Center. Free help also is available across Iowa during the week of Feb. 18-26 during Iowa College Goal Sunday.

Read our next post to learn about common FAFSA-filing pitfalls – and how to avoid them.

By Emily Kittle

Tax-filing missteps that could cost you

With mailboxes filling up with tax-related documents, we turned to a local professional for help navigating the latest tax season.

Cynthia Schlichting, a partner at Riverview Tax & Accounting in Dubuque, argues that one of the best investments taxpayers can make is to hire a professional to file their tax returns.

"In the long run, a tax professional is going to save you more money than if you try to do it yourself," she says. "Otherwise, you end up paying more in than you should and you don’t even know it."
Here are three common tax filing mistakes – and tips on how to avoid them:

1. Many taxpayers who qualify for the education credit miss out on the savings because they don't understand how to compute it. "They can try to read up on it, but the best thing to do is go to a professional and tell them you have somebody in your family in college," she says.
2. Homeowners often overlook the energy credit. They either miss out on the credit when filing their own tax return or go to a tax professional who doesn’t ask whether they made any major energy-related improvements. "These are two of the biggest credits that are out there … that a lot of people qualify for and don’t give to themselves," Schlichting says.
3. Taxpayers submit wrong names on their tax forms, or transpose social security numbers or birthdates. Pay attention to whether someone in your family has a hyphenated name or a different last name. "You have to make sure everything you put on that tax return matches the IRS files," Schlichting says. "They have what’s on your social security card."

 
By Emily Kittle

Exercise your right to healthcare savings

Trying to save more money?

Exercise, and eat right.

Here's why: When we're overweight, not exercising and not eating healthy foods, we're at higher risk for obesity, cardiovascular diabetes, hypertension, stroke and certain cancers, to name a few health conditions. And paying to treat these illnesses and conditions often comes with a big price tag.

"The incidence of healthcare dollars is huge that has to go toward any of these illnesses or conditions from leading a sedentary lifestyle," says Michele Malone, director of the Babka Wellness and Kehl Diabetes Center at The Finley Hospital.

A Centers for Disease Control and Prevention analysis confirmed that individuals who are physically active have significantly lower direct medical costs. The analysis found that getting people to become more active could cut medical costs in the United States by more than $70 billion.

So, what should you do if you prefer the couch to your running shoes? Malone offers a few easy, inexpensive ways to get moving – and start saving more of your healthcare dollars:

• "The No. 1 activity that you can do is walk. If you watch TV, walk around your house during commercials," she says. "Or put your exercise bike or treadmill in front of the TV. You can use soup cans around your home to do some weight exercises." 
• If you haven't exercised in awhile, start with 10 minutes each day, and gradually increase your workout sessions (consult with your physician first). "Even if you have 10-minute segments three or four times a day, that still is beneficial for us," Malone says.
• We're in a great environment to grow our own vegetables," she says. "If you're eating healthier, you're not buying so much pop and alcohol and processed things. Water is relatively low cost."

By Emily Kittle

Budgeting for a baby

Are you ready – financially – to have a baby?

You've started talking about your favorite names – and the ones to avoid. You've got the colors picked out for the would-be nursery. You’ve been daydreaming about family trips to the park.

It's decided: You and your partner-to-be in parenting are ready to have a baby.

But do you have a financial plan in place to account for the growing family?

Tami Rechtenbach, director of member services at Dupaco Community Credit Union, says she's seen many parents-to-be leave the financial planning side of family planning as an afterthought.

"It's really expensive. Make sure you have a financial plan to go along with the hopes and dreams of having a family," she advises. "Are you going to stay at home or work? What kind of income do you have versus the cost of daycare? What are your goals as far as saving for college and providing for your child's education?"

To help plan for overall expenses in childrearing, the U.S. Department of Agriculture offers a free online Cost of Raising a Child Calculator. It estimates how much it will annually cost to raise a family, taking into account everything from higher grocery bills to added life insurance premiums.

Rechtenbach suggests meeting with a financial planner at your credit union to find out how to financially support the family structure you hope to achieve.

"I see a lot of people at my desk who are financially struggling. One person was here last week, and he said, 'Now that I have a child, I really want to fix this,'" Rechtenbach says. "I think if you can put a little thought into it ahead of time, it will make it easier in the long run."

By Emily Kittle

Make your tax refund work for you

It won't be long before Tax Day arrives.

It's not too soon to start thinking about what to do with your refund from Uncle Sam. After all, the majority of us will receive one, with the average refund totaling $2,905, according to the Internal Revenue Service's latest figures. 

But to many taxpayers, the refund feels like lottery winnings.

"The majority of people do not save it, which is what they should be doing," says Dupaco Community Credit Union's Lisa Kruser.

Rather than spend the cash, there are ways you can make the money work for you. Kruser and Paula Ervolino, both financial service representatives at Dupaco's JFK branch, offer five ways to best use your hard-earned refund:

1. Get a no-cost Dupaco Money Makeover. A Dupaco Makeover Artist will look at your total financial picture to identify opportunities where you can cut costs and build savings. During the one-on-one meeting, you can find out where your tax refund will benefit you the most.
2. Save for retirement by investing your money into a traditional or Roth IRA. Dupaco's member service department can help you get started with as little as $5. 
3. Pay down credit card debt to avoid paying high interest rates. "If you have to carry debt, you want to make sure you're carrying the least interest-accruing debt possible," Ervolino says.
4. Use the money to open one of Dupaco's You Name It Savings Accounts. That way, the money is there when you need it. 
5. Talk to an investment professional at Dupaco Financial Services to get an overall picture of your finances, and to make sure you're on the right track to saving for the future.

Once you've filed your taxes, you can check on the status of your refund with the IRS' online tool Where's My Refund? 

By Emily Kittle