Due to our nation’s current economic condition, many Americans may be more dependent on next year’s federal tax refund because of the recession. Many are eager to get their refund to help pay off debts, ease strains of pay cuts or job loss. However, many erroneously associate long waits with refund reimbursement causing people to utilize Refund Anticipation Loans made available by tax preparers. RALs are short-term advancements for potential tax refunds. While RALs maybe a good source of instant cash, BBB wants consumers to understand the true costs associated with the use of these loans. RALs often have exorbitant interest rates, and are sometimes offered by fly-by-night tax preparers. BBB suggests consumers do their best homework this tax season.
RALs are similar to payday loans with interest rates averaging between 50 and 500 percent. These short-term loans are available to those expecting a tax refund, however, there are several dangers associated with their use. In addition to high interest rates, RALs can have hidden administrative fees and require consumers to pay difference if mistake in anticipated amount is made.
According to a survey conducted by the National Consumer Law Center, “RALs drained the refunds of about 8.7 million American taxpayers in 2007, the last year on which the Internal Revenue Service provided data. This represents about $833 million in loan fees, plus over $68 million in other fees.”
Taxpayers in this area can get assistance in preparing their tax return. Please call 211 – Texas to set up an appointment.
Consumers should also be aware of unethical, costly practices such as the “convenient” debit card, which can include hidden fees like charging $20 for every transaction made.
BBB recommends consumers research businesses offering RALs as well as different costs or interest rates associated with the loans they’re offering. According to the IRS, who encourages the use of e-filing, “90 million people used e-file in 2008. E-file supports this growing trend toward electronic tax filing and payment with benefits like: faster refunds, greater accuracy, secure and confidential submission, no paper return to mail, file now, pay later, quick confirmation.” Methods such as these are just as timely as a RAL and don’t cost the consumer to borrow money that is actually theirs in the first place.
For additional information and advice you can trust this tax season, start with bbb.org.
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We serve the following Texas Mid-West Counties: Brown, Callahan, Coleman, Eastland, Fisher, Jones, Mitchell, Nolan, Scurry, Runnels, Shackelfore, Stephens, and Taylor.