Tax Refund Anticipation Loan - Consumer Advisory

This tax season, nearly 10% of U.S. citizens will let someone take their rightful money through fees attached to a refund anticipation loan. The rates may be as exorbitant as 744%. A rapid refund is simply an income tax refund that a tax preparer gives someone almost instantly, typically within one or two days. Instead of waiting for your tax refund to arrive in the mail or through direct deposit directly from the IRS, many people choose to pad their pockets immediately, but at a great expense. Even though the length of the loan only lasts less than two weeks, in some cases, they cost people hundreds of dollars.

This predatory lending practice costs Americans an estimated 500 million dollars a year. Poor people, especially recipients of the Earned Income Tax Credit (EITC), often need money quickly and are affected the most. These people recently accounted for 55% of refund application loans. The EITC program was launched in 1975 in an effort to provide low wage workers with most of the federal taxes refunded. However tax preparation services have undermined this effort.

It may seem silly to a lot of us when people pay nearly a quarter of the amount of their tax refund just so they can obtain their cash in one or two days rather than the standard 10 days after they electronically file directly with the IRS. However, most of us don't really understand how desperate some people feel when trying to get by on a low income.

We have to teach people that they shouldn't be giving up so much in taxes up front. They can get their W-4 forms and their paychecks adjusted to more properly reflect what they will owe at tax time. In doing this they will avoid laying out more money than is really necessary. Taxpayers also need to be taught that there is no charge for filing online these days, and that it takes less than two weeks to have one's refund check deposited directly into one’s bank account.

Patience in getting your tax refund by free-filing can save you hundreds of dollars. You can file taxes for free and get all of your refund by visiting www.IRS.gov and determine if you qualify for free filing. Also, if your income is less than $35,000, you can get assistance from the Volunteer Income Tax Assistance (VITA) program. This assistance is available anywhere in the United States by calling 1-800-829-1040.

Depending on your financial situation, you should consider whether it is advantageous to have your taxes done for free and wait to get the refund, or to have them done by paying a professional. Make sure you realize that having your taxes done by a paid professional can take away a significant portion of your refund.

Ron Finkelstein is NOT a Tax Attorney or an accountant. He is merely a small business owner who has paid a lot of money over the years to learn a whole lot about Taxes and Time Management. If you enjoyed this Tax Refund Anticipation Loan article, you should check out more Tax Tips and How to get Free Tax Software

Article Source: http://www.thearticleinsiders.com