Income Tax Rapid Refund Loans Are Rip-Offs, Advises Popular ICFE Consultant "Mr. G".SAN DIEGO -- "Tax refund Tax refund Money back from the government when too much tax has been paid or withheld from a salary. time is here again and Americans are so anxious to get their money back that some will foolishly pay a high fee to get their refund back a couple of days earlier," says Mr. G., of the AskMrG Web Library, a popular Q&A feature on the San Diego based Institute of Consumer Financial Education's web page: (www.icfe.info). This early refund loan, or "Refund Anticipation Loan A (Tax) Refund Anticipation Loan (RAL) is a high interest rate short-term loan secured by a taxpayer’s expected tax refund. United States In the United States, the taxpayer commonly applies for the loan through a paid tax preparation firm. " (RAL 1. RAL - Rutherford Appleton Laboratory (UK). 2. RAL - An expert system. ), is a very short-term loan against your expected tax refund and is arranged by the tax preparer through a bank. The loan is repaid when the IRS An abbreviation for the Internal Revenue Service, a federal agency charged with the responsibility of administering and enforcing internal revenue laws. sends your full refund to the bank. Refund loans are VERY expensive," warns Mr. G. a/k/a Jim Garnett of Des Moines, IA, who serves on the ICFE's educational advisory board. Loan costs range from $29 to $120, subject to refund amounts, meaning the interest rate on "RAL" loans could range from 40% to over 700% APR APR See: Annual Percentage Rate . The average tax refund of $2,150 would carry a finance charge of $100, or about 178% APR! Additional fees for tax preparation, electronic filing, or check-cashing can double or triple that cost. An RAL loan takes 1-4 days compared to 7-10 days with electronic filing and direct deposit. Pay-stub or "holiday" RAL's, offered before the taxpayer receives a W-2, are based on the latest pay stub A small software routine placed into a program that provides a common function. Stubs are used for a variety of purposes. For example, a stub might be installed in a client machine, and a counterpart installed in a server, where both are required to resolve some protocol, remote procedure which indicates the estimated tax return Noun 1. estimated tax return - return required of a taxpayer whose tax withheld from income does not meet the tax liability for the year declaration of estimated tax . "The estimated amount, however, may not reflect pre-tax retirement deductions, or money withheld for child support or taxes and the taxpayer will have to pay the full amount estimated on the pay stub whether or not the refund is large enough to cover the cost of the loan and fees. Pay stub RAL fees are most often as high as other RAL's. "Avoid these Rapid Tax Refund Loans!" advises Mr. G. The AskMrG Web Library is a nation-wide resource for financial literacy and recorded over half-a-million visitors in its first full year of operation. To view the AskMrG Web Library go to www.icfe.info and click on the AskMrG icon. Mr. G. is the Director of Education at Consumer Credit of Des Moines a/k/a Consumer Credit of America and serves on the Iowa Jumpstart Coalition's Board of Directors. |
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