Refund Loans - Don’t Go There

As if the traditional loans, the credit cards, and the banks weren’t taking enough of the average man’s wages – now tax preparers are popping up to take the tax refund even before it makes it to the people’s hands.

It’s not “interest rates” that are eating up the tax refunds. Instead, companies are calling it an advancement fee or extra fee. Basically, the company that does the tax return agrees to front the individual the full amount of the return before the government even has the forms.

When a person goes into to get the taxes done, the accounting firm wants the payment for doing those forms before the consumer leaves. Those with little “extra” money – typically it is the same ones who are getting the EITC or other government benefits – have no way to pay these firms the fees.

“No problem.”

The companies gladly front the refund – minus the payment and the “extra” fee for getting the money ahead of time. It seems silly that anyone would choose to get the money for a 10% fee or more. The government refunds the payments in two weeks – state refunds can come even sooner. Now there is the option of having funds directly deposited into a checking account so that there is no waiting on the mail. If the fee was an interest rate, it would be usury. That is illegal. But by going through this means, the tax preparers are avoiding the law.

It isn’t a crime, but is it wrong?

The government seems to think so. In an effort to stop these “refund loans,” the IRS will now split the return. The tax preparer gets the fees straight from the IRS and the person gets their tax return with no additional fees taken out.

If you know anyone who might consider getting a “refund loan” then let them know about this new option. Find a firm that will accept the IRS payment and stick with them.

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