Refund Anticipation Loans, Ripoff?

Posted on: April 14th, 2010 by

Tax Preparer - RALS - Rockville, MDRefund Anticipation Loans (RALs) or instant refunds are short term loans offered on the basis of your tax refund.  This is when a tax preparer offers you a payout somewhat smaller than your actual refund, but makes it available immediately so you don’t have to wait for the IRS to mail you a check or deposit the funds into your account.  The preparer/bank will then take the entirety of your refund.  To get the loan, you’ll be asked to pay an origination fee in addition to your electronic filing fee.  If you choose to accept the loan, you will receive a check immediately minus the filing fee, origination fee and other fees associated with preparing both your tax return and RAL.  While the fees may seem small in comparison to the value of the refund, with the today’s electronic filing and direct depositing, the shelf life of the loan is incredibly small.  If you can hold off and wait the 7-10 days the IRS estimates for direct deposit refunds, you would be getting the entire refund and not wasting all those fees.  The preparer/bank, in essence, is getting an almost 100% return on the loan.  A reliable and reputable tax preparer generally will not even consider offering these types of loans unless you are in dire straits.  It is irresponsible financial advice to the client.  So beware; If a preparer offers you one of these out of the blue, I suggest running in the other direction and seeking out a new accountant.



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