A new concept has been introduced to the tax season called the refund anticipation loan. You may have seen some TV commercials offering this service. In the past, people have prepared their taxes, sent the information off to the government and then waited for a check or a direct deposit to arrive. However, some tax preparation services are offering to give you the money in just 1-2 days but the catch is that it is a loan. The loan period lasts about 10 days which results, effectively, in an astronomically high interest rate. The tax refund is your money, but by opting for this choice, you will eventually be paying a big chunk of that refund to your tax service. It would be wise to use some caution and figure out the costs and benefits ahead of time before you agree to this.

A whopping 500 million dollars a year is expected to be spent by Americans on the predatory lending practice. Sadly, it is the poor who are the worst affected, desperate as they are to get their money as soon as possible. The recipients of EITC, the Earned Income Tax Credit, are specifically targeted as statistics show. 55% of refund anticipation loans went to them. What started in 1975 as a program to aid the low wage workers is now being exploited by tax preparation services. As a result, a substantial portion of the refunds get wiped off. Refunds are granted to the recipients of EITC who get their federal taxes refunded in an attempt to get some relief from their poverty.

Doesn'™t it seem ridiculous, if you are expecting only a $760 tax refund, to fork over nearly $220 so you can receive your check in a day or two rather than getting it in ten days by filing with the IRS online? Maybe, but we don't all realize how frantic someone can get when simply trying to get by from day to day.

We have to teach people that they shouldn't be giving up so much in taxes up front. They can get their W-4 forms and their paychecks adjusted to more properly reflect what they will owe at tax time. In doing this they will avoid laying out more money than is really necessary. Taxpayers also need to be taught that there is no charge for filing online these days, and that it takes less than two weeks to have one's refund check deposited directly into one's bank account.

If your financial life is difficult its important to weigh the benefits and drawbacks of getting money fast vs. getting more money by waiting only 8-9 more days. Free filing is available to those who qualify using the criteria that can be found at www.irs.gov. Assistance from the Volunteer Income Tax Assistance program is available for people with incomes less than $35,000. VITA can be reached at 800-829-1040 with sites around the country. Keep what is yours- don't let H&R Block or Jackson Hewitt keep part of your hard-earned income. Explore your options and be patient- it might save you a couple hundred dollars or more.

Ron Finkelstein is NOT a Tax Attorney or an accountant. He is merely a small business owner who has paid a lot of money over the years to learn a whole lot about Taxes and Time Management.

If you enjoyed this Tax Refund Anticipation Loan article, you should check out more Tax Tips and the best Tax Deductions for Homeowners

Article Source: http://www.articleset.com