Income Tax Items of Interest

I received something in the mail that was a bit disturbing to me, so I thought I’d mention it for your information. There is a tax preparation outfit in the Springfield area (I won’t mention it by name, but if you have been on Wabash Boulevard recently you’ve seen their pitchman dressed in green waving at cars), who has sent a notice out to, presumably, the entire area, advertising that they will do your taxes for free.

I’m as big of a bargain hunter as the next guy, so when I see something for free it piques my interest. When I read the fine print on the ad, it points out that the free tax preparation doesn’t apply to refund anticipation loans (RALs). Now we’ve arrived at the crux of the matter. As it turns out, this outfit (and most other “tax prep in a box” stores) have very little vested interest in preparing your return accurately – except for the fact that they want to saddle you with the fees associated with a refund anticipation loan.

According to the Center for Responsible Lending, RALs are nothing short of the Pay-Day check cashing stores in sheep’s clothing – offering short-term cash advances at amazing rates: starting at around 40%, and ranging as high as 700% in some cases. Obviously this is a lucrative game, as the big name tax preparation firms are into it in a big way, and many other, smaller firms (like the one I received the advert from) are also looking for a piece of the pie.

The long and the short of it is this – as enticing as it may sound to get your refund immediately when you sign your tax return, don’t do it! With e-Filing and direct deposit, most of the time you’ll have your refund back in just a few weeks. And if you’re getting so much back that this becomes a life-changing event for you, you should probably review your W4 and have a little less withheld – thereby giving yourself a raise with every paycheck.

Another point that I wanted to mention, regarding tax refunds: Does everyone realize that the Economic Stimulus payments (the one that Congress has decided all of us Americans need to fix the economy) are simply a refund of your own money? And that at some point we’re going to have to give it back, with interest?