3 Reasons To Avoid Tax Refund Loans
You might be considering indulging in one of those income tax refund loan advances, but you should think again. It is probably better to just wait it out because you will get your money. These short term loans end up costing American taxpayers over $900 million in fees every year. Over 12 million people shelled out high fees and percentage rates in order to get their refunds faster.
Roscoe Ill CPA Dan Stoica explains –
1. Large Fees: If you add up the loan fees, the tax preparation fees and the e-filing charges, the average refund of $2000.00 is reduced by nearly $300.00 just to begin the filing of your return. Every one of us wants to know when we will get our refunds and some of us need that extra money so badly we are willing to spend the extra money to get it faster.
2. Outrageous APR: In order to go take a loan on your refund, you could end up paying between 222.5% and 2000% in interest. This is no joke. We wouldn’t accept those terms for any other kind of loan, so why accept it for money that is already rightfully yours?
3. The IRS Could Hold Up Your Refund: If the IRS finds a problem with your tax return, they could take weeks, or sometimes even months to finish processing your refund. If this is the case, your short-term loan turns into a long-term loan and you will end up having to pay out those outrageous interest rates. If that happens, goodbye tax refund.
If you take the time to plan ahead, you won’t end up looking for a way to get your refund so quickly. You can wait it out and not stress over it. There are certain things you can do to not stress over the whereabouts of your refund:
3 Things You Can Do Next Year
1. You can reduce your tax withholding for next year.
2. You can file your taxes as soon as you get your W-2, file electronically and opt-in for direct deposit.
3. Try to change your financial circumstances (i.e. get yourself into a smaller tax bracket or look for deductions and credits).
If you have any questions about your refund or a refund loan, please contact a tax professional.
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