With the April 15 tax deadline looming, many of us feel the pressure to get our taxes done. Whether you’re filing your tax return yourself or enlisting the help of a commercial tax service, make sure you’re aware of all your options.
We all want a big refund check, but think twice before you opt for that “instant” refund offer and sign up for a refund anticipation loan. These enticing deals seem perfect when you’re in need of quick cash, but the fees can really add up, and there are other ways to get your refund quickly without paying more.
In recent years, more than 400,000 North Carolinians have paid an estimated $44 million in fees related to refund anticipation loans, according to a study by the Community Reinvestment Association of North Carolina.
So don’t take that rapid refund check without taking a good hard look at what it really means and what it could cost you:
– Accepting that check actually means you’re taking out a loan against the refund you expect to get back from the IRS. There’s no guarantee that you will get a refund from the IRS, and if the IRS doesn’t give you a refund, you’ll still have to pay back the loan.
– As with any loan you’ll also have to pay interest. But with refund anticipation loans, the interest rate is usually much higher than conventional loans. Some commercial tax services also charge an extra filing fee on refund anticipation loans.
– You don’t need a refund anticipation loan to get your refund quickly. You’ll likely get a refund back in as little as one or two weeks, without having to play a large fee, if you file your taxes electronically.
– Special rebate checks may go out to families this year as part of a federal plan to help the economy. Watch out for refund anticipation loans that promise to help you get your rebate money early. Taking out a loan against your rebate could cost you hundreds of dollars in interest and fees.
Also keep in mind that there are less expensive or even free ways to file your taxes:
– Many online tax filing programs provide discounts or are free to use. If you have questions about one of these sites, call the IRS customer service line at 800-829-1040.
– There are additional options for low and middle income consumers who need tax help. Volunteer Income Tax Assistance is a nationwide program that gives consumers within certain income brackets free help in submitting their taxes. Volunteer centers are typically located in town halls or county social services centers; it is a good idea to call first to set up an appointment. To locate the nearest site, contact the IRS at 800-829-1040.
– In North Carolina, State Employees’ Credit Union and the Local Government Federal Credit Union both offer free tax help through the volunteer program for families earning less than $40,000. Credit unions and other lenders may also offer more affordable ways to take out a loan against your refund if you really need one.
– You might be entitled to a refund even if you don’t have to pay taxes. Call the IRS or visit www.irs.gov/eitc to learn more and to see if you qualify for an Earned Income Tax Credit. This credit is a refundable federal income tax credit for low-income working individuals and families. During the 2004 tax season, an estimated 64 percent of refund anticipation loan borrowers in North Carolina received these tax credits, according to the Community Reinvestment Association study.
Cooper is N.C. Attorney General.