| Many people will take advantage of refund anticipation | | | | occurs several days after the tax return has been |
| loans this tax season without knowing what they are | | | | filed, even if it's been filed electronically. |
| and how they work. | | | | Lenders are willing to make these loans because the |
| The way these loans work is simple; a person | | | | vast majority of tax returns are approved by the IRS |
| completes their income tax return and submits it. A | | | | within a few days of filing. The lenders are willing to |
| lender then issues a loan which will be repaid using the | | | | take the risk of a few returns being rejected because |
| amount of the tax refund. Large numbers of | | | | they know that they'll get most of their money back. |
| taxpayers take out such loans every year without | | | | The danger is that the return maybe rejected and the |
| realizing the risks involved. | | | | taxpayer will still have to pay off a loan. This can |
| The vast majority of refund loans are made through | | | | damage an individual's credit rating and ability to |
| tax preparation companies such as H&R Block, | | | | borrow money in the future if they can't the loan. |
| Liberty and Jackson Hewitt. Many of these companies | | | | Some of the tax services will also take unpaid |
| operate store front locations in poorer neighbourhoods | | | | anticipation loan amounts out of future tax refunds. |
| that specialize in making these loans to working class | | | | This means that you should not take out a refund |
| people. The people who walk in to these tax | | | | anticipation loan if you don't need to. For the vast |
| pre-parers may think they are getting an early refund | | | | majority of taxpayers it will be better to wait to get |
| when they are really taking out a loan. | | | | the money and not take the risk of owing money to a |
| The biggest risk from an anticipation loan is one that | | | | lender. |
| most people don't know about. The borrower will still | | | | The wait to get the refund money isn't that long |
| have to pay off the refund anticipation loan if the IRS | | | | because it takes the IRS only a few days to approve |
| rejects the tax return. The taxpayer will still owe the | | | | tax returns. Once the return is approved the IRS can |
| lender the money and interest on the loan. | | | | electronically deposit the refund amount into a bank |
| This can occur because the tax return is not official | | | | account almost instantly at no charge to the taxpayer. |
| until the International Revenue Service accepts it. A | | | | Another advantage to not getting a refund loan is that |
| tax return is not official when the tax prepare has | | | | the taxpayer will get the full amount of the refund. |
| completed it. All the prepare has done is fill out the tax | | | | When a lender makes such a loan they take a fee out |
| forms; the return is not official until the IRS signs off on | | | | of the refund amount. That means the taxpayer isn't |
| it. | | | | getting back all the money the government owes |
| This can't happen until an IRS employee has looked | | | | them. Refund anticipation loans simply are not a good |
| over the return and approved it. That process usually | | | | deal for most people. |