Ask Tax Cat: Should I Get My Taxes Done For Free At Walmart?

Every year around this time, Tax Cat emerges from his basket to answer questions and offer advice to you, the fine people of the internet.

Q: Dear Tax Cat, I’ve noticed there is a free tax preparation deal being offered by Walmart and H&R Block. The deal offers a free refund anticipation check. Should I try it?

A: There are really two deals here. In the first deal, you can get your taxes done by either Jackson Hewitt or H&R block for free (through the end of Feb), if you are filing a 1040EZ. The catch is that the 1040EZ isn’t for everyone, and you could get caught paying some fees if you don’t meet the requirements.

Use the 1040EZ if:

• Your taxable income is below $100,000
• Your filing status is Single or Married Filing Jointly
‚Ä¢ You and your spouse – if married — are under age 65 and not blind
• You are not claiming any dependents
• Your interest income is $1,500 or less

The second deal involves a free refund anticipation check. This deal means loading your refund onto an H&R Block Emerald Prepaid MasterCard. H&R Block says its card has zero liability if someone uses it without your permission. But it has fees, including a $2.50 ATM cash withdrawal fee, a $1 ATM balance inquiry/ATM denial fee, and a $25 over-the-counter withdrawal fee. Here’s the link to the FAQs.

With a little bit of effort, you could prepare and file your federal taxes online for free through IRS Free File or TaxACT, or any number of other companies (filing and preparing your state form might cost you). The IRS says if you e-file and arrange to direct deposit your refund, you could get your money in as little as 10 days. I’ve had pretty good luck going that route, even with some of my more impatient human clients. So unless you’re desperate for the cash–or love the bright lights of Walmart–this is a better way to go.

Comments

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  1. Cat says:

    No. Just NO.

  2. Raekwon says:

    A lot of the free programs charge you for State tax prep and submission. Haven’t looked at either of these 2 yet but I have had that hidden charge in the past.

    • theblackdog says:

      This is how I got nailed many years ago when I was a college student. H&R block did my federal for free, then charged about $30 for the state income tax. That combine with a $300 tax bill (when you make about half of that in a month) hurt.

      • teamplur says:

        Ha, I just don’t DO a state return :)
        as a California resident living out of state for military service, I don’t have to pay any state taxes. My wife on the other hand made so little that she doesn’t have to file in this state. I am paying her federal tax out of my refund tho >_>

        • theblackdog says:

          Lucky. Unfortunately since I “lived” and worked in New Mexico for long enough, I had to file a state return. That usually netted me a small refund, but it was the Federal taxes that were killing me.

    • webweazel says:

      SOME state forms work right off of information from the Federal form. Like “Line 35: Enter total from Federal form 1040 Line 22″. So it is an easy thing to do the federal form with the free software, print it out, then fill out the state form by hand. Have the form instructions opened on the computer from a download that you can get from any state. Follow along and fill it out.

      I did this for quite a few years with varying ease, depending on which state I was living in at the time. Now, I just buy the package deal from TaxAct every year, because their software kicks ass and I like to support them with my purchase.

      • dangerp says:

        Yeah, I used the same system for quite a while. If you have your 10404 from (name of free tax program here) in front of you, it’s easy as pie to fill in the lines on the state’s EZ form.

    • sponica says:

      I know when I used to file MA income taxes those were part of a free-file conglomerate…so were NYs.

  3. Bsamm09 says:

    If you make less than $50,000 try one of the VITA sites. Especially if you are in a college town. Beta Alpha Psi (accounting honor society) requires volunteer hours and a lot of the tax students choose this and you can get knowledgeable people. And it is free.

    Link: http://www.irs.gov/individuals/article/0,,id=107626,00.html

    • colorisnteverything says:

      Yep. Grad students always benefit from this. Our grad school actually sends out a reminder about VITA. They were awesome for me last year.

  4. theblackdog says:

    Also use the 1040EZ if you’re taking the standard deduction. If you’re itemizing, you have to use 1040

  5. Hi_Hello says:

    while during my e-file I notice something I never did before.. efile your federal through a company, you have to use that same company to efile your state… you can’t use another company. You can still mail in your state though.

    I always wonder how some places offer Federal free and people just don’t efile their state on their own.

    • Karney says:

      I e-filed my federal through turbotax for free, then efiled my state directly through mass.gov no problem. Perhaps it varies by state?

      • Hi_Hello says:

        hmmm probably. but you are efiling directly through the state. I wonder if my state have this

      • theblackdog says:

        I know TaxACT doesn’t E-file your Federal tax until you complete the state part of their software as well (which is the part they will charge you for). No thanks, I work around that and then fill in and file directly with the state of Maryland.

        • CosmosHuman says:

          Not true. I used TaxAct free from the IRS website and filied my FED taxes, will get refund any day now. I went to my own state’s tax website and did the state taxes for free and have already received my refund.

          • theblackdog says:

            Odd, maybe I didn’t go through the special website. As soon as I was done with the federal questions they went right into the state questions.

  6. nearly_blind says:

    First of all anyone that can use 1040-EZ should really do their own taxes. Do you really need a “preparer” to fill out a simple one-page form that a 10 year old could figure out?
    Second, why are you clamoring for your refund such that an anticipation check is something that is a benefit to you? Anyone who, every year, expects a significant refund, should change their withholding such that they get no refund the next year, and instead get more net pay in their regular paychecks. Why do you want to lend goverment your money interest free? If you can’t save otherwise, then open a Christmas Club account like my Grandma used to do.

    • Karney says:

      Actually I am lucky that I had them withhold more this year. I usually get a lot back but went up a tax bracket this year. If I had less withheld I probably would have owed a significant amount back to the gvt.

      • mischlep says:

        “going up a tax bracket” doesn’t suddenly mean that all your lower income is taxed at a higher rate, it’s only the dollars you earn beyond the ceiling of the next lower tax bracket are taxed at a higher rate

        I could understand if you went from the top of the 15% bracket ($34,500) to the upper reaches of the 25% bracket ($83,600, and congratulations if you did by the way), that’s $4,910 in differences between the two tax rates (15% compared to 25%). That’s a pretty serious chunk of change,

        I’d consider firing your accountant or payroll department. Not recognizing you’re moving up a bracket and not adjusting tax withholding appropriately is a big error. It also leaves you open to penalties for tax underpayment.

        http://www.irs.gov/taxtopics/tc306.html

        • Karney says:

          I am aware of this, but I got a new job, which payed about 20K more (all in the next tier) plus got a divorce, which changes the values of the tax bracket between filing jointly and filing single. The two changes combined made a very significant impact.

          • Karney says:

            I also hate that it jumps from 15% to 25% to 28%…seems like that 25% should be a bit lower to keep the increments more even.

            What is even more sad is that I filed with a good chunk of change in the 25% bracket, yet a millionaire like Mitt Romney managed to squeeze all of his into the 15% bracket. Good ole middle class hatred.

            • psm321 says:

              It’s because pf the ridiculous notion of capital gains tax… taxing money made by money less than money made by people working

        • noramine says:

          “”going up a tax bracket” doesn’t suddenly mean that all your lower income is taxed at a higher rate, it’s only the dollars you earn beyond the ceiling of the next lower tax bracket are taxed at a higher rate”

          -did not know that, good info.

      • psm321 says:

        Can’t just be the tax bracket… withholding tables account for that. Unless you hit the ceiling for some kind of deduction or credit…

    • Nigerian prince looking for business partner says:

      I’ve always been under the impression, based on the advertisements, that the anticipation loans were directed towards those expecting a big EITC refund. It’s not really an issue of adjusting one’s W-4 if they’re getting back more than they paid in the first place.

      • Not Given says:

        There is a form you can file, not a W4, that lets you get at least some of that EIC in your paycheck.

        • sponica says:

          yeah but you have to know in advance that you’ll qualify for it….I’ll probably end up qualifying for it (for a grand total of about 50 or 60 bucks) because most of my income was UI this year and I’m in the income range to qualify for it, but if I had filed for it through the last job I held, I’d end up owing money

    • sponica says:

      everyone defines significant refund differently…mine usually end up in the ballpark of a grand or 1500, so I think adding an exemption would translate into me owing the feds money. i don’t want to owe them money..

      when your employment/deductions are wildly unpredictable between tax years, it’s just easier to err on the side of caution

    • theblackdog says:

      When I was climbing the corporate ladder, it made sense to claim no exemptions and have the highest withholding because I ran the risk of getting a nasty tax surprise otherwise. Now that I’m on the forced plateau, I could adjust my withholding and claim exemptions, but the money back just isn’t worth enough to collect a whole $3 a year in interest.

    • DrPizza says:

      I dunno, my refund check has varied wildly over the last 5 years, with a max of about $11k, and a minimum of about $3k. I’m not going to pay my accountant a lot more money to even attempt to forecast what it will be throughout the year, so that I could adjust my W-4 withholding to keep my return close to zero. Cost of additional accountant services: ~$600 Loss of interest on the excess I paid in the worst year: $110 (at a generous 2% interest.) 1000′s of business miles driven in my car (with a rate that changed in the middle of the year), all sorts of unexpected deductions, unexpected expenses, depreciation schedules on lots of equipment, etc. – It’s worth every penny to not get blasted unexpectedly by owing $6000 when I file (and possibly a penalty for not withholding enough), and to pay for an accountant.

    • nearly_blind says:

      Responding to some of the points made in your reponses:
      1) There are many online payroll calculators where you can enter you gross pay, period (e.g. weekly), expemptions, married/single, etc. and they will basically reproduce your pay stub exactly showing all your withholding for fed taxes, SS, Med, etc (should match exactly with you’re actually paystub says). You can use this to see exactly what how increasing exemptions on W-4 will effect the federal taxes withheld. Its not a guessing game.
      2) Penalties for underpaying your taxes are feared more than they should be. First there are several critera that must be met to be assessed a penalty, it’s not just that you owe money. . One of which is that there’s no penalty if you owe less than $1000. Second the interest rate the IRS charges you (the Penalty) is small, currently 3% per year. Note that’s the APR and not the penalty you owe, because the amount you owe is not late by a whole year if you file you taxes before April 15.

    • noramine says:

      Not everyone has your problem with letting the government use tax money for things. The government hooks me up with lots of basic services over the year, I really don’t give a fuck if they’re getting my money “without interest!!!!1″

  7. u1itn0w2day says:

    Tax preperation is not free. You give up your private financial information and social security number and put it’s security in the hands of more underpaid individuals and underprotected data bases.

  8. CubeRat says:

    I used the IRS site and do my Federal taxes free with the free electronic filing. Then I go to California’s site and do my State taxes free with free electronic filing free.

    Much better than trusting Wally world to do my taxes.

    • theblackdog says:

      I do that as well. The Free Fillable forms on the IRS site is not a bad interface and then I can go over to the state of Maryland’s website to complete my state taxes. Done in an hour or two and then my refund is quickly back to me.

  9. Jacob says:

    Most of the free tax preparation services (TurboTax has one as well) are only for those filing a form 1040-EZ. Like the form number suggests, that form is pretty easy. In the 6th grade we practiced filling those out. You could probably fill it out in less time than it would take to drive to your Walmart.

    • sponica says:

      yeah I was doing the EZ by hand in high school….granted I’d do one copy in pencil and then do it in pen

      • Nigerian prince looking for business partner says:

        Back when I did taxes by hand, I always did everything in pencil and then traced over my work with a fine tip sharpie when it was finalized.

  10. dush says:

    So they charge you to use your own refund money?
    uh hmm lemme think…DON’T DO IT!!

  11. Bob Lu says:

    btw, can any suggest any tax software that can do “dual status year” tax? Dual status means that for tax purpose, I was non-resident alien for part of 2011 and resident alien for part of 2011.

  12. alana0j says:

    AHHH! Refund anticipation check does NOT mean it’s loaded on the Emerald Card. You CAN have it loaded and avoid the $35 fee, but you can also get direct deposit into your bank account or for an additional $20 you can get a good old fashioned paper check. The refund anticipation check is simply a means for a person to not have to pay tax prep fees up front, they are withheld from their tax refund.

    PS-I am typing this from an H&R Block office…in case you can’t tell :)

  13. vliam says:

    I used Turbo Tax Free Edition (or whatever it’s called). It didn’t cost me anything for fed or state tax. Of course, that’s because I was just under the threshold for AGI for free filings in both. If you make above that point, your results may vary. Also, the state electronic filing for free option varies widely.

    I’m scheduled to get my fed check two weeks after my filing.

    • vliam says:

      Also, I didn’t use file a 1040EZ (student loan interest payments). You can file a 1040A for free if you meet certain requirements (are poor).

    • noramine says:

      I did the same less than half an hour ago.

      There’s no reason to do it by hand if a)math isn’t your strong suit and you want to ensure that you don’t make a mistake and b) you don’t want to deal with it and take an extra few weeks to get your money. I’m not ashamed to file with Turbotax. I’d never go to a tax prep ripoff site though. I used to work at a payday loan place in Florida that had a tax center and they would take so much money off the top in fees and then force us to haggle with the people over cashing them too (for another fee of course). One of our prepared talking points is “it cost you so much to file (great self-advertising there), why don’t you want to pay to cash it right away?” Oh dear God.

  14. Darkneuro says:

    I’ve done the federal through TaxAct for years now. I’m in TN, so I don’t have state income tax. As a matter of fact, there’s a move on to have the state constitution amended to say ‘no income tax’.
    As a comparison, my sister had H&R do hers for their advance check/card for a few years, but got wary a couple years back when they tried to tell her she could deduct her moving expenses when she moved on a whim.

  15. hahatanka says:

    As for 1040EZ “Anybody can do it.” HA! As an accountant, you can’t believe how people can screw things up.
    Free tax at the local college means idiots who think wages are the same as income from selling a product. One has a self employment tax the other doesn’t.

  16. noramine says:

    dude just go to irs.gov and find their free efile list. It has places in every state. I transferred my Turbotax free federal over to a Turbotax “freedom edition” free federal AND free state. Either way, anyone can get at least free federal. It literally took me like 15 minutes to put all the info in and send it out.

  17. Yorick says:

    bah and humbug!

    I live in NY, so I get a free e-file for the state return by using H&R’s online freefile.
    In fact, I had my various documents in hand by this past Wednesday, did my taxes on Thursday, reviewed the forms twice, and filed on Friday. Probably the first time I’ve ever been able to file in January.