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The Morning Call ArchivesCopyright ? 2009 The Morning CallByline:?By Paul Muschick Of The Morning CallHeadline:?Your wallet will thank you: Be patient for IRS refundTax season is the one time of the year when many of us actually get cash back from the government. Don't blow it by falling for traps set by tax preparers and banks who promise to get your refund faster, for a price. That price is too steep. It sounds great to get your refund sooner than the Internal Revenue Service wants to fork it over. Who wouldn't want to stick it to the IRS? But you're only cheating yourself if you expedite your tax return by taking out a tax refund anticipation loan. Say you're due $3,000. Taking out a refund anticipation loan in that amount would cost $62 to $110 in fees, the Consumer Federation of America and National Consumer Law Center estimates, depending on which tax preparer you choose. That may not seem like much, but wouldn't that money be better spent on your cell phone bill, dinner out with the kids or gas to get to work? You earned the refund, and all you need to collect the whole thing is a little patience. Consumer advocates sound the warning every tax season, pointing out the loans are used mostly by the working poor, who can afford them the least. "There's no way you can call this anything other than a predatory product," said Alan Jennings, executive director of the Community Action Committee of the Lehigh Valley. Tax preparers and their partner banks that make the loans, naturally defend them as a service that's in demand. They say the loans give people, including those without bank accounts, quick access to cash and cost less than a cash advance on a credit card or other short-term loan. They say consumer groups mislead people about the loan costs by inaccurately combining the fees to calculate astronomical annual interest rates. The Consumer Federation of America and National Consumer Law Center say the fees can equal an annual rate of 85 to 1,300 percent. I'll let them argue how to use the numbers. What you should focus on is the bottom line -- there's no reason to pay anything to collect your tax refund. Tax refund anticipation loans are offered by the nation's largest tax preparers such as H&R Block, Jackson Hewitt and Liberty Tax, and by smaller ones. They do your taxes and calculate your refund. If you mail your return, you could wait six weeks for your refund. If you file electronically, you'll get a check in about three weeks. If you file electronically and have the money deposited directly in a bank, you could have it in 10 days. But tax preparers offer the opportunity to get the refund in only a day or two, or even the same day, through a refund anticipation loan. The preparer's banking partner -- frequently HSBC and Santa Barbara Bank & Trust -- lend you the dough. You repay it by directing the IRS to send your refund to the bank. Loan fees are taken out of the check you get. Your tax preparation fee also may be taken out, making the loan even more attractive because you don't have to pay cash for that. Times may be tight, but don't do it. Don't get talked into a similar program, either, called a tax refund anticipation check. That will cost you only about $30. But it's $30 you don't have to spend. Refund anticipation checks occur when your tax preparer and its bank set up a temporary bank account so you can get a direct deposit of your refund. A check then is cut from that account. Jennings said it's another example of exploiting people without bank accounts. "The juiciest targets are the people who are unbanked," he said. The truth is, you have options for getting your tax refund quickly, and maybe even getting your taxes prepared for free. Open a bank account -- many banks offer free ones -- and get your refund deposited at no cost. You'll get it as fast as the IRS can deliver, without paying. Households earning less than $42,000 a year can get free tax prep, and electronic filing, through the Volunteer Income Tax Assistance program. There are 110 sites in the eight-county Lehigh Valley region, including four run by the CACLV. In an attempt to combat tax refund anticipation loans, CACLV started offering people without bank accounts a low-cost debit card, $2.95 a month, that acts as a bank account where the IRS can deposit a tax refund. More information about free tax preparation and tax refund anticipation loans is on my blog at . The Watchdog is published Thursdays and Sundays. Contact me by e-mail at watchdog@, by phone at 610-841-2364 (ADOG), by fax at 610-820-6693, or by mail at The Morning Call, 101 N. Sixth St., Allentown, PA, 18101. TAX REFUND ANTICIPATION LOANS Fees of $34 to $130, cost depends on the size of the loan. Preparers also may charge application, processing or similar fees of $25 to several hundred dollars. H&R Block, Jackson Hewitt and Liberty Tax don't charge them. In 2007, 8.67 million taxpayers took out tax refund anticipation loans at a cost of $833 million in loan fees and $68 million in other fees. In 2007, 11.2 million taxpayers received tax refund anticipation checks at a cost of $336 million. Some fees have dropped from past years, along with the number of people using tax refund anticipation loans since 2004. Source: Consumer Federation of America, National Consumer Law CenterSource:? ................
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