The airwaves are full of tax ads this time of the year. In fact, I wouldn't be surprised if the national chains were spending more this year than in previous years. The spin is at an all time level. If you are familiar with the world of tax prep, you can see through the spin as well I can. But if taxes are not your interest/bread and butter, please let me go over a few basics.
How your return is prepared is up to you. While paper forms are harder to come by, you can download or request forms from the IRS and states and complete you own return. Or, you can use computer software instead of paper. And my favorite, you can hire a tax professional to complete the return for you. No matter how your actual return is prepared, you have two filing options. The return can be mailed or it can be electronically filed. The choice is the taxpayer's. You always have the right to mail in your return. The e-file mandate did not change that. Even if you prepare your return on paper, there are businesses that will transmit the return to the IRS and state agencies. Many preparers offer this service for a set up fee. My credit union has offered e-file for members for years. For most preparers, the actual e-file is free. It's part of the service of preparing your return. It's quicker and easier and some preparers actually charge extra if the return is mailed. So, those ads that brag how they will e-file for free as if it's some special perk they give their clients are spinning their services.
Once the return is filed you have two ways to get your refund or pay your balance due. Just like filing the return, payment can be by mail or electronically. If you qualify for a refund, the IRS and states would love to direct deposit your refund into your bank account or have you sign up for the new debit card program(for the IRS refund). But they will still send you a check if that is what you prefer. Owe money, you can send them a check by April 18, 2011. Or you can set up a debit from your bank account if you are signed up for EFTPS. And there are other electronic options to have your balance due come out of a bank account or be charged to a credit card. Are they extra fees? Not for a direct deposit of your refund. And a debit from your account probably won't cost you anything but charging to a credit card will have a service charge. But your preparer isn't charging you that. The company handling the payment is passing on the service fees a business usually absorbs to you. Be wary of a preparer/software that charges extra for that service.
So, what you pay to get your return filed and refund/payment settled is the cost of the software program you are using or the preparation fee your preparer is charging. And that preparer is going to charge you something. Unless they are a VITA or AARP site, that advertised "free" return may not be free. First, the taxpayers who can use a 1040EZ are very limited because of income and dependent qualifications. And you still have to file a state return which is not included in the "free" promo. Don't be surprised if you walk out having paid for something. But remember, if you aren't happy with the way the interview and pricing goes, you can get your W-2s and other documents back with no charge as long as the return has not been filed. And the preparer can't charge you, that applies to all paid preparers.
There are a lot of other services that preparers and tax software makers promote at this time of the year. While the ads may only mention them in the fine print, they are fee based. The biggest money maker is the Refund Anticipation Loan (RAL) and the Refund Anticipation Check (RAC) (this goes by several names). The RAL program is on life support this year and most tax preparers who offered these loans in prior years, can't offer them this year. And the offices that can do RALs are doing credit checks (not mentioned in the ads) and limited the amount of the advance. The rest of your refund will come when they get your refund from the IRS. Some of the offices that can't do RALs this year are offering regular loans with special rules. They are hoping that their RAL clients won't catch the difference until the return has been filed. The RAC program can be a good program for certain taxpayers. But they are not a faster way to get your refund. They operate on the same timetable as the IRS Direct Deposit. You are paying for preparation fees to come out of your refund not speed. (Even waiting for a mailed check will only add about 10 days to your wait.)
This year taxpayers need to take special care with tax ads. As the major players, both software and preparers, have seen their business change drastically, they have taken to the airways to convince you that nothing has changed, they can still give you the same programs you are use to. Be wary, ask questions, don't assume it's the same programs you've don't before. Oh, and the spin is not limited to the national chains.