A new concept has been introduced to the tax season called the refund anticipation loan. You may have seen some TV commercials offering this service. In the past, people have prepared their taxes, sent the information off to the government and then waited for a check or a direct deposit to arrive. However, some tax preparation services are offering to give you the money in just 1-2 days but the catch is that it is a loan. The loan period lasts about 10 days which results, effectively, in an astronomically high interest rate. The tax refund is your money, but by opting for this choice, you will eventually be paying a big chunk of that refund to your tax service. It would be wise to use some caution and figure out the costs and benefits ahead of time before you agree to this.
In general this kind of predatory lending is believed to cost Americans nearly $500 million dollars annually. Sadly, people with low incomes are most affected because their urgency for fast cash is greater. The prime targets frequently tend to be those who receive EITC, the Earned Income Tax Credit. Not long ago, they accounted for 55% of refund anticipation loans. The program, which was founded in 1975 to assist the working poor, is being manipulated by tax preparation firms that are digging their claws into these refunds -- refunds that are awarded based on the cornerstone of the EITC get the majority of the federal tax payers as a way to relieve difficult financial burdens for low-income workers.
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. Hold on to the money you've rightly earned - make sure H&R Block or Jackson Hewitt don't get any of your hard-earned income. Look at different filing options and remember that patience can save you several hundred dollars, or maybe more.
In general this kind of predatory lending is believed to cost Americans nearly $500 million dollars annually. Sadly, people with low incomes are most affected because their urgency for fast cash is greater. The prime targets frequently tend to be those who receive EITC, the Earned Income Tax Credit. Not long ago, they accounted for 55% of refund anticipation loans. The program, which was founded in 1975 to assist the working poor, is being manipulated by tax preparation firms that are digging their claws into these refunds -- refunds that are awarded based on the cornerstone of the EITC get the majority of the federal tax payers as a way to relieve difficult financial burdens for low-income workers.
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. Hold on to the money you've rightly earned - make sure H&R Block or Jackson Hewitt don't get any of your hard-earned income. Look at different filing options and remember that patience can save you several hundred dollars, or maybe more.
About the Author:
Ron Finkelstein is
NOT a tax lawyer or a Certified Public Accountant. He is plainly
a entrepreneur that's forked out a small fortune throughout the years
in order to understand tax tips like finding the top ten missed tax credits and help with tax preparation
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