To Insure or Not to Insure?

June 1, 2012 by

By Leigh Guth, Lincoln County Extension Agent

That is the question most everyone is asked when they buy a new phone, computer or any electronic gadget these days.  Usually it is at the checkout counter with little time to ponder the pros and cons.  There are five people in line behind you, or you have a 7-year old with you.  It doesn’t sound expensive, and you would hate to have this new coveted gadget broken by said 7-year old, so, you sign on the dotted line.

There are several basic concepts when it comes to insurance, a financial tool to guarantee against risk of loss or harm.  As a consumer, you have five choices.

  1. Cross your fingers and do nothing more.
  2. Avoid loss by avoiding risky behaviors or dangerous locations.  Examples would be not taking your electronics to the swimming pool, not smoking, or giving up sky diving.
  3. Reduce your chance of loss by taking certain actions like wearing safety gear, keeping your computer in a protective case, or using a smoke detector at home.
  4. Accept risk knowing that you can afford to pay for the loss. The most common example is an insurance deductible.  You agree to pay the $500 deductible because you can afford that amount, and it will lower your annual insurance cost.
  5. Transfer the risk by purchasing insurance.

Keep in mind the large-loss principle when choosing what to insure.  Purchase insurance with the extent of the loss in mind and not the likelihood of loss.  For example, you have lost or damaged several cell phones in the past; the potential of harm or loss is high for subsequent phones.  However, the cost to replace a phone is $200.  This is not a large loss; therefore, do not purchase insurance but reduce your risk or accept the risk.   Take the $7 monthly insurance fee and put that into an emergency fund to help pay for the phone if it is lost or damaged.

Let’s apply this concept to disability insurance.  The likelihood that you will have an illness or injury that keeps you from working may be low.  However, if individuals depend on you for income or for caregiving, what would happen to them if you were no longer able to function in that capacity? How much income would they need to replace your lost wages?  Replacing just $1,200 a month for 18 years would amount to $259,200 in lost income.  This is a substantial amount and justifies insurance based on the large-loss principle.

Make sure that you do not purchase insurance that duplicates other coverage. For example, do not purchase insurance when renting a car.  Check with your current auto insurance; you are probably already covered or can add a rider for less than the policy at the rental counter.

Based on the concepts of large-loss and non-duplication, most people need health/medical; disability; life; property, and auto. 

Agents, what insurance-related questions do you hear most often?

Resources:

http://www.extension.org/pages/16131/meeting-your-insurance-needs

National Financial Core Competencies Discussed in this post:

Protecting, Saving

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Saving Money on Summer Expenses

May 25, 2012 by

By Sarah Mammarella, Extension Agent, Richmond County

Summer is a great time to start saving money.  Whether it is to beef up your savings account or stow money away for a special trip event or annual holiday expenses, saving money feels good.  In order to save money we need to look at what summer expenses we can reduce.

Perhaps the most obvious place to start during the hot summer months is with our electric bill.  There are many different things that we can become more mindful about in our home that will help reduce our electric bill.  Here are a few tips that help me save money on my electric bill every month:

  • Shut off all lights and TVs in rooms that are unoccupied: This may seem like a no-brainer but this wasted energy use happens much more than you’d think.
  • Turn your thermostat up in the summer when you are not home: There is no need to cool an empty home; I normally set mine to 79°.  While you are at home, try keeping the thermostat between 76° and 78°, and using ceiling fans to keep cool. Remember to turn fans off in rooms that are unoccupied; their benefit is lost if you’re not underneath or near the fan.
  • Don’t bother turning a thermostat down from 80° to 62° with the intention of cooling your home more quickly; this will only cause your heat pump to overwork and will not bring on cooler temperatures any quicker.
  • Unplug anything that is pulling energy when you are not using it: Items such as cell phone chargers and laptops are constantly pulling energy when plugged in.  You can save a lot of money just by unplugging these items.
  • Use a power strip with an on/off switch for your television, DVD player, and other home entertainment items, and turn the switch off to the power strip when not in use: Much like the chargers, these items can still draw energy while not in use.
  • Don’t forget to unplug televisions, lamps or alarm clocks that seldom get used in guest rooms.
  • Weatherproof your home: Seal cracks around doors and windows where cool air may be escaping.  You can do this with weather stripping or in some instances, caulk.
  • Insulated drapes can help keep cold out during the winter and heat out during the summer. These can lower heating and cooling costs.
  • Make sure that you change your central air filter every month: This can help your central air run more efficiently and even increase the life of the unit.

Another summer savings opportunity is on food and convenience items.  By being mindful of how and when we shop, we can possibly save hundreds every month. Here are a few tips that help me save money on food every month:

  • Collect coupons: You can do this either by buying the Sunday paper and clipping them or going to various websites to print them off of the Internet.
  • Match your coupons to the sale items: Look through sale fliers of your most frequented grocery and drug stores and match your coupons to the sale items so you are getting the best price possible.
  • Find out when your grocery store is doing a double or triple coupon day: Most grocery stores will have specific days or weeks that they will double or triple your coupons.  This may lead to getting many items completely free.
  • Only buy sale or clearance items that you know you will use. Buying on sale is no bargain is you never use it. This can happen when buying clothes with the intention of losing weight or purchasing a kitchen gadget that you simply don’t have time to use.
  • Buy in bulk: Even if you live by yourself, you can save money by buying certain foods in bulk and freezing individual portions in freezer bags.

Although I believe that electricity and food are the easiest places to start, I do other small things to try to leave me more money in my pocket every month.  A few extra tips to save include:

  • Reduce drive time: Gas is expensive; so don’t make unnecessary trips.  Car-pooling is always a great idea.
  • Enjoy outdoor activities: Instead of paying to go enjoy your summer, try getting outside and taking advantage of free activities such as swimming, hiking and tennis. Here is a list of free or very cheap summer activities for children.
  • Get your clothes at second-hand stores: I rarely buy new clothes.  Although it may take some time, you can find used clothes that are in great shape at local Goodwill and consignment shops.

Saving money can be satisfying because it means that we are attaining goals that we have set for ourselves.  Recognizing that there is excess money being spent on such things as electric and groceries can empower us to reduce our spending by using common sense and mindfulness.

What are your favorite money-saving strategies?

Resources:

KeepingCoolrev

http://www.extension.org/pages/25638/low-cost-and-no-cost-actions-to-save-home-energy-and-money

http://www.extension.org/pages/25623/selecting-energy-efficient-home-refrigerators-and-freezers

National Financial Management Core Competencies discussed in this post: 

Saving, Protecting

What is foreclosure?

May 23, 2012 by

By Jayne McBurney, Johnston County Extension Agent

Changes during the economic recession, rising fuel process and job loss have all made money management difficult. For homeowners, protecting assets in the wake of economic uncertainty has been especially trying; unfortunately, some have had to face foreclosure. What exactly does that mean?

When a prospective homeowner signs on for a mortgage, it is important to be sure that the household budget will support of paying the mortgage every month with each payment on time. Missing mortgage payments is not an option for a homeowner, and doing so could cost the homeowner more than just a place to live if the bank chooses to foreclose the loan. Foreclosure proceedings take place after a number of missed monthly payments have occurred. Missing just one payment will make you delinquent, but if you do not remedy the situation quickly, the bank can take back ownership on the home, that is, they can foreclose the loan.

Homeowners should let their lender, or loan servicer, know as soon as possible when they are unable to make a mortgage payment. Lenders are currently being strongly encouraged to try to work out loan delinquency with mortgagees and there are many incentives for lenders to modify and rework loans for homeowners. Government programs, such as www.makinghomeaffordable.gov can help homeowners who have been unsuccessful working directly with their bank.

If a homeowner is unable to make mortgage payments at all, or resolve difficulties in paying their mortgage, the bank might try to encourage a “short sale,” which gets the house on the market and hopefully sold before a foreclosure takes place. It is possible for a homeowner to remain in the home while the house is on the market (or is listed for sale).

Once a foreclosure is initiated, the owner loses possession of the home as well as any equity they might have in the home. A foreclosure may seem like an immediate answer to money worries, but these former homeowners will end up with a long-lasting negative mark on their credit report, appearing for several years. Foreclosure will significantly lower the former homeowner’s FICO score also. It is very important that current and prospective homeowners make their mortgage payment an inflexible monthly obligation in their finances.

The North Carolina Housing Finance Agency offers good advice for homeowners having difficulty making a mortgage payment:

  1. Don’t ignore the problem.
    The further behind on payments you become, the more difficult it will be to reinstate your loan and the likelihood of losing your home increases.
  2. Open and respond to all mail from your lender and the North Carolina Housing Finance Agency.
    The first notices you receive will offer good information about foreclosure prevention options. Later mail may include notice of pending legal action. Your failure to open the mail will not be an excuse in foreclosure court.
  3. If you have requested a modification or other workout plan with your servicer, please confirm that your servicer has received all of the documentation required. If you are already in a trial modification, please verify that your servicer has received the updated income, expenses, and financial hardship information that are required to convert the trial modification into a permanent modification.
    If you are missing documents, submit them as soon as possible. Create a system to track the date documents were submitted and when calls were made to your loan servicer and other entities. Remember to write down the name of the person with whom you spoke. A calendar and lined notebook paper is all you need to create your record system. Homeowners who miss deadlines may lose their eligibility.
  4. Read your loan documents so you know what your lender may do if you can’t make your payments. If you meet with a housing counselor, bring these documents.
  5. Prioritize your spending.
    After health care, keeping your house should be your first priority. Review your finances and see where you can cut spending in order to make your mortgage payments. Look for optional expenses: cable TV, memberships, entertainment, etc. that you can eliminate.
  6. Use your assets.
    Do you have assets, such as a second car, jewelry, or a whole life insurance policy that you can sell for cash to help reinstate your loan? Can anyone in your household get an extra job to bring in additional income? Even if these efforts don’t significantly increase your available cash or your income, they demonstrate to your lender that you are willing to make sacrifices to keep your home. It is not recommended that you use retirement savings, however.
  7. Avoid foreclosure prevention companies and foreclosure recovery scams.
    If any firm claims it can stop your foreclosure immediately if you sign a document appointing them to act on your behalf, you may well be signing over the title to your property and becoming a renter in your own home! Never sign a legal document without reading and understanding all the terms and getting professional advice from an attorney, a trusted real estate professional, or a HUD-approved housing counseling agency.

You also should not have to pay fees for foreclosure prevention help – use that money to pay the mortgage instead. Many for-profit companies will contact you promising to negotiate with your lender. While these may be legitimate businesses, they will charge you a hefty fee for services that are offered for free through HUD-approved housing counseling agencies.

Any program that requires you to pay upfront fees to help you avoid foreclosure is illegal. The Office of the N.C. Attorney General provides help identifying and combating foreclosure scams.

Foreclosures that took place between Jan. 1, 2009 and Dec. 31, 2010 may be eligible for review. The deadline to submit a request for review was April 30, 2012. For more information, click here

Resources:

http://www.ncforeclosurehelp.org/

http://www.makinghomeaffordable.gov

National Financial Management Core Competencies discussed in this post:

Borrowing, protecting, spending, earning

Chain Purchasing: The Diderot Effect

March 19, 2012 by

By Deborah J. Taylor, Extension Agent, Orange County 

The vast majority of Americans are trapped in a “work and spend” cycle. As a society, we have at our disposal an abundance of material goods, which we have to work at an incredible pace to pay for. Many Americans spend more than they earn. Typically when Americans purchase one item, an upgrade of another item is required. This is referred to as the Diderot effect.

The Diderot effect is a social phenomenon related to consumer goods, which results in spiraling consumption (chain purchasing) resulting from dissatisfaction created by a new possession. The term was coined by anthropologist and scholar of consumption patterns, Grant McCracken, in 1988, and is named after the French philosopher Denis Diderot (1713-1784) who first described the effect in an essay. The term has subsequently come to be used, especially in discussion of sustainable consumption or green consumerism, to refer to the process whereby a purchase or gift creates dissatisfaction with existing possessions and environment, provoking a potentially spiraling pattern of consumption with negative environmental, psychological and social impacts.

For example, Jane buys a new couch for $400 for her living room to replace the old, donated one she’d had for the past 10 years. Now that it’s in her home, her living room chair looks shabby and outdated. Jane decides she must also replace this chair to complete her living room’s new look. However, once the new chair, which cost $250, is in place, Jane can’t help but notice how dirty and dingy the carpet looks beside the clean, new furniture upholstery. Jane decides to replace the living room carpet, but finds she’ll get a “better price” if she replaces all the carpet in her home. The total cost for replacing the carpet is $2,300. Jane’s original $400 purchase has now escalated into nearly $3,000.

For the unsuspecting consumer, the Diderot effect can be invisible in the marketplace. With the proliferation of commercials and other marketing strategies being thrust upon consumers around the clock, the insidious side effects can be far-reaching and damaging to individuals and families. Advertisers often look for people who are trendsetters to promote their products and get the ball rolling in influencing the masses to buy certain goods in order to follow suit. In every area of our lives, we are coerced into buying more items to supplement the new items we have purchased. If you buy a new dress, you will need new shoes or a new handbag. If you buy a new couch, you’ll need a new chair. Although some of this need to constantly “add-on” or upgrade” is driven by aesthetics, manufacturers also drive some of it. For example, in the area of electronics, old equipment may not be compatible with new equipment. An example: having to buy a new printer to go with a newly purchased computer because the connections on the old printer are not compatible with the ones on the new computer.

How can consumers avoid falling prey to the Diderot effect or chain purchasing?

  • Control your desire to purchase. Stay away from malls and other places where you may be tempted to spend. When you buy a product, think about how much “more” you’ll need to fulfill that purchase (more games for the game console, more accessories for the redone kitchen, etc.).
  • Create a new consumer symbolism, making it less attractive to be exclusive. Whenever you see a symbol of excessive spending, look at it for what it is: successful marketing. If you desire a certain item, ask yourself if you really need it.
  • Control yourself by placing voluntary restraints on competitive consumption. Not only encourage yourself, but also encourage your friends and associates to put caps on spending. Get involved in making group decisions and suggest spending caps. You’ll often find that others are relieved too
  • Learn to share. Consider sharing expensive purchases (like a lawnmower) with your neighbors. Consider rentals or secondhand items when shopping for sporting equipment and narrow-use items. Use your local libraries for books, DVDs and CDs.
  • Become an educated consumer and deconstruct the commercial system. Deconstruct every ad you see. When you see a product you want, research it and understand it before making the purchase.
  • Avoid “retail therapy”. Spending can be addictive. If a particular mood or event triggers a desire to shop, find other ways to spend time or relieve stress
  • Make time. Look for ways to reduce the time you spend working so you can increase the time doing things that are more valuable to you, and things that potentially can save you money. Choose activities to do with that extra time that don’t involve spending and consumerism.
  • Work toward coordinated intervention. Look for larger societal solutions to this issue. Get involved in organizations that focus on consumer issues and reducing spending. 

References

Brewer, P. February 27, 2012. Lifestyle Upgrades: Beware of the Diderot Effect. http://www.wisebread.com/lifestyle-upgrades-beware-the-diderot-effect.

Manning, L and Mahar, Carla  (2007). Teaching Your Children About Money. G1787, University of Nebrask – Lincoln Extension.

Schor, Juliet B. (1998). The Overspent American: Why We Want What We Don’t Need. New York: Basic Books.

Take Control for Your Future: Telling the Kids: We Need to Spend Less. North Carolina Cooperative Extension – March, 2009.

Core competencies discussed in this post: Spending, saving
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Updates from the Spring Institutes

March 19, 2012 by

By Molly C. Herndon 

The Central District Spring Institutes training conference was held earlier this week in Winston Salem. Last week, the Western District met in Asheville. At the end of this month, we will travel to Greenville for the Eastern District meeting. What a great opportunity to hear what programs you’re using and to receive feedback from Agents.

Many of you have shared success stories about the programs and resources you’re using, and I’ve attempted to collect these so Agents across the state can “hear” your thoughts on these programs. If you’ve used these programs, or if you would like more information about any resource listed below, please leave a comment below this post.

Did I leave yours out? Please share it in the comments section and I’ll add to this list.

My Interest Rate Can Beat Your Inflation Rate!

February 27, 2012 by

By Leigh Guth, Lincoln County Extension Agent 

There’s a wonderful Extension curriculum, Money Talk for Women, which I use frequently. Throughout the curriculum, the author points out how, in general, women view money differently than men. Women tend to think about money as security for themselves and their children rather than a sign of power or achievement. Because women are concerned about their security, they may be more conservative with their money and investments. Furthermore, we know from research that women are, as a rule, more focused on relationships. So, putting these ideas together, look at the following scenario:

I am a woman making money decisions on my own for my family. I do my banking right down the street from my workplace; I may personally know a banker through my social circles. Based on my comfort level and relationship, I chose to invest my money at that institution in a CD earning 2.25%. I feel confident working with someone I know, and I feel that I can access my money at an institution right down the block. Besides, this is not risky like the stock market – I’m guaranteed a fixed interest rate.

In this situation, by leaning toward security through a fixed-rate CD, the investor will lose money. Yes, the balance will continue to rise as interest is added, but buying-power is decreasing. Inflation is the rate at which buying power decreases. For example, $100 today buys less than it did two years ago.  In 2010, the average inflation rate for the year was 1.5%. In 2011, the annual inflation was 3%. And in January 2012, it was 2.93%. Only in the year 2010 (rate of 1.5%) would this CD offering 2.25% in interest get the owner ahead because the interest rate earned was more than the rate of inflation:

CD Interest rate of           2.25%

Less Inflation                    -1.50%

Net interest gain               0.75%

In 2011 and January 2012, this CD earning 2.25% might be secure, meaning that the investor is not at risk for losing any of the principal and will earn a guaranteed return on the principal.  But it is important to realize that the owner would be losing buying power: 2.25 – 3.00= -.75%.  The money, principal and interest, that is withdrawn at the end of the CD term the money will buy almost one percent less (-0.75%) of goods or services than the investor could have purchased with the principal alone at the beginning of the CD term.

So the next time you are evaluating interest rates on potential investments look for the other rate – the inflation rate. Make sure your interest rate can beat your inflation rate. Other investment options to consider include:

  • Mutual funds, which diversify the money invested over several products in an effort to minimize risk
  • Tax-deferred investments which include retirement accounts such as a 401(k) or an IRA.
  • Savings bonds are US Treasury-backed securities that offer modest returns, but also offer tax benefits.

Leigh Guth will be offering a Money Talk for Women series April 17-20 and 24, from 9 a.m. to noon. To register or learn more contact Leigh at Leigh_Guth@ncsu.edu.

Extension Agents, have you used Money Talk for Women? Do you think this curriculum’s assumptions about women’s investment habits are accurate?

Core Competencies Discussed: Saving, Protecting.

Resources for Teaching Children Smart Money Skills

February 24, 2012 by

By Molly C. Herndon

The Military Families Learning Network recently hosted a web presentation called Talking to Military Kids About Money. Dr. Kate Fogarty and Anita McKinney, of Florida Extension, shared a wealth of resources for working with children to develop these important skills. If you are interested in viewing the recording of this session and copies of the slides to download, check http://learn.extension.org/events/441 . Online resources shared during the presentation included:

Books for young children include:

  • Alexander, Who Used To Be Rich Last Sunday by Judith Viorst
  • A Bargain For Frances by Russel Hoban
  • A Chair For My Mother by Vera Williams
  • Just Shopping With Mom by Mercer Mayer
  • My First Job by Julia Allen
  • Ox-Cart Man by Donald Hall
  • Sheep in a Shop by Nancy Shaw
  • Something Good by Robert Munsch
  • The Berenstain Bears & Mama’s New Job by Stan & Jan Berenstain
  • The Berenstain Bears’ Trouble With Money by Stan & Jan Berenstain
  • The Purse by Kathy Caple
  • Tight Times by Barbara Shook Hazen

Books for older children are:

  • All the Money in the World by Charles Robinson
  • Mall Mania by Stuart J. Murphy

What resources do you use in your work with parents and guardians teaching their children smart money skills?

IRS introduces a new tool to find nearest VITA location

February 17, 2012 by

By Molly C. Herndon

The IRS has introduced a new tool for taxpayers to use to find locations for help with filing their returns through the Volunteer Income Tax Assistance, or VITA, program. VITA locations typically offer free assistance with tax preparation for individuals with an income of $50,000 or less.
Click here to find the VITA tax preparation site nearest to you.

VITA was created in 1969, and in 2011, volunteers prepared more than 3 million tax returns through the VITA program and the sister program, Tax Counseling for the Elderly.

Another good program to be aware of is the Tax Counseling for the Elderly (TCE) program. This program provides priority tax preparation services for all taxpayers over age 60. Click here to find TCE locations.

In addition, the Internal Revenue Service just announced the North Carolina organizations funded to offer tax payer preparation assistance for low-income tax payers.
The organizations are:

  • Community Reinvestment Association of North Carolina – Durham $37,500
  • Legal Services of Southern Piedmont, Inc. – Charlotte $92,000
  • North Carolina Central University School of Law – Durham $75,000

Making the Most of Your Tax Refund

February 15, 2012 by

By Leigh Guth, Extension Agent, Lincoln County 

Palms get itchy this time of year with folks anticipating their tax refund. All too quickly the refund is here and gone again, spent as quickly as it came. It is important to remember, especially this time of year, that a tax refund is not “free money” – rather it is the return of earned income. Agents, this year, help others develop a plan for saving the bulk of their refund. For example, by taking a small amount – perhaps 20% – to use that for a fun purchase or a vacation. But, by saving the remaining 80% of the refund, taxpayers can begin improve their family’s financial situation. Here are some considerations to share with your clients:

Look at your financial health and consider the year ahead.

What debts are you paying off?  Do you have a high interest credit card or loan?  Check out PowerPay.org to see how much money you would save in interest by paying a lump sum toward your debt. Power Pay will show you which loan you should target and how much quicker you will pay off your debt by using your refund as a debt payment.

What crisis could come along?

Do you have six months’ worth of living expenses saved for an emergency?  What if you were to lose your job?  What if you need to repair your car, replace your washing machine, or have a major medical expense? Could you pay for those things without resorting to your credit card?  A tax refund is a great way to start an emergency fund that would help handle any of these events.

What big events are planned this year?

Is there a wedding, summer trip or a graduation in the future?  Use your tax refund to open a savings account for this purpose. With a lump sum to start you on your way, adding a small monthly amount can make saving for a special occasion a cinch.

Are you saving for your retirement or your child’s education?

This tax refund could make a great impact toward any savings goal and can have a positive effect on your taxes for next year.

As discussed in a recent post , by using direct deposit for your tax refund, you are already taking a step toward success!  Directly deposited refunds arrive faster than a mailed check. By using an IRS Form 8888, you can assign your refund to up to three different bank accounts.  So, you could send 20% of your tax refund amount to a checking account reserved for discretionary purchases, then, send the remaining amount to a retirement account or savings account. You can also use this form to purchase up to $5,000 of U.S. savings bonds to add to your retirement or education savings. Now, you are already on your way to improving your financial health in 2012!

Agents, the National Financial Management Core Competencies addressed in this blog are:

  • Saving: relationships with financial institutions, plan for retirement, child’s education, and other needs, plan for long-term goals
  • Borrowing: plan and meet your payment obligations
  • Protect: build up an emergency fund

As you can see, sharing the information in this blog with your clients will help them build competencies in three of the national competency areas: (1) Saving, (2) Borrowing, and (3) Protect.

What are some of the ways you can share this information with your clients?

Resources:

Bird, Carolyn L. Getting the Most from Your Tax Refund (FCS-528-01). Raleigh: North Carolina Cooperative Extension Service, NC State University.

Smart Uses for Your Tax Refund. North Dakota State University, Extension Service. December 2010. 

10 Tips to Make Filing Easier

February 13, 2012 by

By Molly C. Herndon

It’s that time of year once again – tax-filing time. Last week’s post discussed strategies for getting a smarter refund, and this week we’re offering tips to make the filing process easier. The North Carolina Department of Revenue has shared 10 tips that should making filing in NC easier this year. Extension Agents, please share this helpful list. 

Ten tips for filing taxes in North Carolina

Tax season is here and making it easy for taxpayers to understand and file their taxes is a top priority for the North Carolina Department of Revenue. Providing the correct information and remembering a few simple tips will help ensure you have an error-free tax return that can be processed quickly and correctly.

1. Extended filing date– Individual income taxpayers will have until April 17, 2012, to file returns, extensions and payments normally due on April 15. The extension is to accommodate Emancipation Day, a legal holiday in the District of Columbia. Get more details on the extension.

2. Gather all your income and tax documents before you file– Filing before you receive all W-2s and 1099s often leads to errors that require you to file amended returns once you have the correct information. Employers are required to mail W-2s and other documents by Jan.31.

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3. File electronically and request direct deposit for refunds-This is the most convenient, accurate and the fastest way to file your taxes. Electronic filing will identify common math errors and direct deposit to your bank account means you get your money sooner. Some taxpayers may qualify for free or low-cost electronic filing. Find out how to E-file and if you qualify for low-cost filing.  Some taxpayers with low-to moderate- incomes may qualify for free tax preparation through the Volunteer Tax Assistance Program. To locate the nearest VITA site, call 1-800-906-9887 or visit the IRS website.

4. File electronic federal and state returns at the same time-Failure to file both returns at the same time could require taxpayers to amend North Carolina returns if the IRS detects any errors with their federal return.

5. Check your address-Every year, thousands of refund checks are returned to the Department of Revenue because of incorrect addresses, and the law forbids the forwarding of those checks. Carefully check the mailing address you provide on your return.

6. Do not file photocopies of tax forms-Use pre-printed or downloaded forms from the department’s website. Photocopies may not scan correctly and could cause delays in processing your return. Taxpayers can request forms onlinedownload forms from the NCDOR website, or call 1-877-252-3052.

7. Make checks payable to the N.C. Department of Revenue if you owe state taxes-Some taxpayers mistakenly send checks made out to the Internal Revenue Service for their state taxes. Payments may also be made on-line through our secure website. Just visit www.dornc.com and click on Electronic Services for Individuals.

8. File on time regardless of ability to pay-Make sure you file on-time to avoid the automatic failure-to-file penalty of five percent per month, up to a maximum of 25% of what you owe in state taxes. You are better off filing your taxes by the April 17 deadline and contacting the department at 1-877-252-3052 to arrange a payment plan if you cannot pay all at once.

9. Check to see if you qualify for common credits, deductions or exemptions-You could qualify for popular credits such as the Earned Income Tax Credit both federally and with the state.  Some severance pay may also be exempt if you were laid off from your job.

10. Find and use a reputable tax preparer– Taxpayers get billed for millions of dollars in state taxes each year as a result of deliberate errors made on their returns by fraudulent tax preparers.  Be wary of preparers who: claim they can obtain larger refunds than others, ask you to sign a blank tax return, base their fees on a percentage of a taxpayer’s refund and who are reluctant to offer references.  If you see information on your return that is wrong or confusing, you should question the preparer and if not satisfied with their response, called the NC Department of Revenue at 1-800-232-4939.

Questions, need more information? If you have any questions or need more assistance, please call our Taxpayer Assistance Center at 1-877-252-3052.