An Instant Tax Refund Will Cost You
Getting tax refund money the quick and easy way may not be the best way. As the saying goes on Wall Street, “There’s no such thing as a free lunch.” Meaning, you may think you’re getting a great deal but if you look beneath the surface there’s always a cost.
Several tax filing programs that make it pretty easy to file online, particularly if you’re using the 1040EZ form. The majority of taxpayers who make $58,000 or less (70% of the U.S. tax-paying population) qualify for a refund, and if the form is completed online, you can get your refund from the IRS within 7-14 days paid directly to your checking account.
However, many people want to get their refunds right away, so businesses have cropped up to fill that need, for a price. Some of these businesses will give you money up front and charge an annualized interest rate that exceeds 100%, plus administrative fees. For example, through the Jackson Hewitt Taxpayer Service, which operates in various locations as well as in 2,000 Walmart stores, a taxpayer with an anticipated refund of $2000 can get an immediate Refund Anticipation Loan (RAL) of $1561. Sounds pretty good, right?
Wrong. Their finance charge is $61, which equates to an annualized percentage rate of 124% plus Jackson Hewitt charges almost $50 in administrative fees. That’s a hefty chunk of change for the privilege of having most of your money a week or two early.
You can get free help with filling out tax return paperwork from the IRS sponsored Volunteer Income Tax Assistance Program (VITA). It is available throughout the country and is for taxpayers earning less than $48,000 who aren’t able to file a tax return on their own. Certified volunteers who have passed an IRS course on tax preparation, operate out of community centers, libraries, schools and shopping malls. Many sites will also electronically file the return for you. To find a location call 1-800-906-9887.
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