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Nov. 6, 2009
Rabbi Berel Wein: Choosing to hear
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Caroline B. Glick The mullahs' big week
Suzanne Fields A Fallen Wall for Fallen Man
Nov. 5, 2009
The Kosher Gourmet: Three scrumptious -- but simple -- butternut squash dishes
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Nov. 4, 2009
Tom Hamburger and Kim Geiger: Should prayers be covered?
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Nov. 3, 2009
Martin Peretz: Beware, Barack. Beware, Rahm. Beware, Axelrod
JWisdom.com Are you are closet idolater? With Sara Yoheved Rigler (10 minutes)
Nov. 2, 2009
Paul Greenberg: The Holocaust is now on Facebook
JWisdom.com Abraham's Strange Change With Rabbi Yitzchok Fingerer (5 minutes)
Oct. 29, 2003
Mortimer B. Zuckerman: Graffiti On History's Walls (MUST-READ!)

Jewish World Review Jan. 30, 2007 / 11 Shevat, 5767

Tax-time saving tip: Free filing is available

By Vicki Lee Parker


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http://www.JewishWorldReview.com | (MCT) There are several things that consumers do that make me want to grab them by the collar and shake some sense in them - a phrase my grandmother was fond of using whenever I made a fool of myself.

Topping my list today: people who agree to pay excessive fees for refund anticipation loans offered by the major tax preparers, such as H&R Block and Jackson Hewitt.

What rattles my nerves is that many of the people paying these fees have low or moderate incomes, and they would qualify to have their returns done for free. If most of them would just wait a week or so, they could have the full refund they are entitled to - and save several hundred dollars to boot.

The fees for refund anticipation loans can be staggering.

Customers are typically charged fees for the refund anticipation loan, electronic filing, tax preparation and a short-term bank account for those who don't have a checking or savings account. It can easily add up to $250, or even as much as $400, depending on the size of the loan.

And now, with the newest pay-stub lending product - where tax preparers use consumers' year-end pay stubs to estimate their refund and sell them a loan based on that amount - that figure could increase by $100 more.

Despite stern warnings from consumer advocates that refund anticipation loans are rip-offs, people still march into tax preparation offices and demand them. And the companies continue to market them, despite increasing criticism.

"There were 492,318 refund anticipation loans in North Carolina in 2004," said Adam Rust, research director at the Community Reinvestment Association of North Carolina in Durham. Nearly two-thirds went to filers who were eligible for the federal Earned Income Tax Credit, given to qualifying low- to middle-income families, he said. That resulted in about $62 million going to large corporations instead of families.

"To have the EITC be undermined by a product like this I'm sure is frustrating to the people who designed" the tax credit, he said.

Given all the cons of these loans, I was struggling to understand why so many would get them. Then I thought about my grandmother.

She would often ask me, "Girl, don't you know better than that?" Sometimes the honest answer was, "No, I don't."

I found that that was the case with many people who apply for refund anticipation loans. They are not aware of some of the programs available to help them prepare their tax returns for free and get them all of their refund.

So here are some things that people should know if they are thinking about applying for a refund anticipation loan:

  • It no longer takes months to get a refund from the IRS. If you file your federal tax return electronically, you could receive your refund in 10 days, and no later than three weeks. For tax returns filed through regular mail, the refund would take no more than six weeks. So if you can wait a week or so, you can save several hundred dollars.

  • Households earning $52,000 or less can qualify for free IRS electronic filing. Just go to www.irs.gov, click on the "e-file" icon, then click on the "free file" link.

  • If you prefer to work with a tax preparer face to face, you can set up an appointment with an IRS volunteer at a network of free tax preparation sites around the state during tax season. They prepare returns for people whose household incomes are $39,000 or less. To find the nearest Volunteer Income Tax Assistance office, call (800) 829-1040.

I know that there are a few financial emergencies that might justify paying high fees for a refund anticipation loan, such as if you are about to be evicted. But there are far more reasons not to get one.

And now that you know some of those reasons, here is one more pearl of wisdom from my grandmother: "Now that you know better, do better."

Every weekday JewishWorldReview.com publishes what many in in the media and Washington consider "must-reading". Sign up for the daily JWR update. It's free. Just click here.

Vicki Lee Parker is a columnist for The News & Observer. Comment by clicking here.

Previously:

College money is waiting; don't procrastinate
Extended warranties rarely worthwhile
Too busy for tax planning? It'll cost you


© 2007, The News & Observer Distributed by McClatchy-Tribune Information Services

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