The “Rapid Refund” Rip-Off

Can you imagine spending up to a full week’s wages on a service that speeds up your tax refund by only one week? It may sound crazy, but each year, many Wells County residents pay outrageous fees to borrow their own tax refund money.

We’ve all seen the commercials for “Fast Cash Refunds”, “Express Money” and “Instant Refunds.” In this tough economy when money is tight and bills are due, these offers seem tempting. However, most of these too-good-to-be-true “refunds” aren’t refunds at all. They are short-term loans with APRs that can reach over 700%! These loans are borrowed against your own tax refund money and come with a hefty price tag.

Let’s say you are expecting a tax refund of $2,000, and you visit a tax preparations site that offers a “fast cash refund”, promising that you will get your money right away. You can expect to pay a RAL (Refund Anticipation Loan) fee of about $75, plus an Electronic Filing Fee of $75 more, in addition to a Tax Preparation Feel of around $100. You just paid $250 (nearly a week’s wages for some workers, and more than 10% of your refund!) to get your money just a week earlier than you would have with a direct deposit from the IRS. Is it worth it?

If you are facing a serious financial emergency, the “rapid refund” may seem like your only option, But it is merely a short term solution to a long term problem, and will just leave you with more debt in the long run. These loans can get you into serious trouble if the IRS delays your refund, or if your refund is smaller than expected. You are still responsible for paying off the loan and all the interest that has snowballed in the mean time.

There are many resources available in northern Indian to help you keep more of your hard-earned tax refund. If your household income is $42,000 or less, you qualify to have your taxes prepared for free at a VITA (Volunteer Income Tax Assistance) site. You may also qualify for the EITC (Earned Income Tax Credit), a refundable tax credit of as much as $4,800 for some families. This credit is often overlooked by tax preparers, but VITA volunteers are trained to identify qualifying taxpayers. The VITA volunteers can c-file your return and you can request that your refund be deposited directly into your bank account. You can have your refund in as little as a week. I encourage all qualifying Wells County residents to take advantage of these valuable opportunities. It’s your money. Hold on to it.

For information on the VITA site nearest you, call 2-1-1 from any phone. The 2-1-1 operator can give you directions to the site, tell you what you need to bring, and answer any other questions you may have. Happy filing!