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Paying to get your money

March 17, 2010
Times Leader

BARBARA?E. RILEY, Ohio Department of Aging DirectorTax time is here, but there is a bright side. Many people can look forward to a tax refund. In fact, for some people, their tax refund is an important part of their budget, so the idea of not having to wait to receive their refund is very attractive. There are companies who will give you a tax refund advance, often referred to as a tax refund anticipation loan, so that you can receive your money immediately, but is this really a good thing?
A tax refund loan is similar to a payday advance loan. You go to a participating company with your tax information, and they issue you a check based on your estimated refund amount. To get the loan, you usually have to pay a fee, plus an electronic filing fee, plus any fees associated with preparing your return. The loan company then sets up a special account so that your refund from the IRS goes directly to them. Your loan is considered paid in full when the IRS deposits your refund into that account. If the tax refund is smaller than anticipated, you will have to pay the difference.
Promises of an instant tax refund might be tempting, but what you are really paying for is a high cost loan. On average, you pay at least 200 percent interest to receive your tax refund 10 days before the IRS would have paid you. The Consumer Federation of America and National Consumer Law Center found that more than 12 million taxpayers received a refund advance in 2004, paying a total of $1.6 billion dollars in fees and interest.
Tax refund loan advances were developed to avoid the eight to 10 week waiting period to receive your check from the IRS. Before you get one, consider your options.
∫ The IRS’s Free File program allows you to file your taxes electronically, which will speed the processing of your return.
∫ The Ohio Benefit Bank counselors, in 87 of Ohio’s 88 counties, help prepare and file federal and Ohio income tax returns at no cost to eligible Ohioans.
∫ Free Benefit Bank income tax assistance also is available through an online, self-service program.
∫ The AARP Tax-Aide program has trained and certified volunteers at approximately 350 sites throughout the state ready to help people of low to middle income, with special attention to those age 60 and older.
These programs offer electronic filing and direct deposit, which means you will receive your return usually within two weeks.
Financial experts say is the only reason you should ever consider a tax refund loan is if your mortgage company is threatening foreclosure. Even then, it may be better to take your tax return to your bank to show them the amount of the refund you are expecting and ask for an extra 10 days.
If you think you or a loved one has been the victim of suspicious or unfair tax refund loan practices, file a consumer complaint at the Attorney General’s Help Center, 1-800-282-0515 or online at
Once you have filed, you can visit the IRS Web site to find out when you can expect your refund. The page requires your Social Security number, filing status and the amount that you are expecting to get as a tax refund.




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