It’s going to be hard not to notice in the coming weeks. On radio, TV and media of all kind. Even standing on the street corner spinning a sign. No, it’s not where to go to get a yummy breakfast or a bargain haircut. It’s to tell you where to go to get money NOW via an advance on your tax refund.
This year more than ever before, due to the IRS announcement that tax refunds generated by the Earned Income Tax Credit will take longer to issue due to efforts to combat fraudulent refund claims, those who depend on those refunds for basic needs will be clamoring for this service. And it’s a big business. According to the National Consumer Law Center, 12 million taxpayers obtained refund anticipation loans (RALs) in 2004. Over the years since, there has been a lot regulation introduced into the RAL business that has changed the business model and prompted these service providers to be more creative in how they approach it. For example, some offer zero percent RALs for limited amounts just by simply having them prepare the tax filings for a fee. Which might seem like a great deal until you consider that many of these individuals are likely forgoing the many options out there now to prepare and file simple tax returns for free. Income generated from service fees is another angle used.
In the end, paying someone for your own tax refund when you can get it for free is no bargain at any cost. While recognizing that it can be very difficult for some to do, planning and prioritizing your personal finances to avoid having to depend on your tax refund getting to you sooner rather than later, will save you money in the end.
By Dale F. Jensen, CPA