Cue the annual solicitations from businesses offering rapid refunds or refund-anticipation loans. While those transactions may be tempting, consumer groups such as the Center for Responsible Lending warn that high interest rates or fees are a bad deal. CRL communications manager Charlene Crowell explains.
"Either way you go, whether it's the refund-anticipation check or the refund-anticipation loan, you are going to be out of a good bit of money that could be in your pocket."
Some tax-refund loans have interest rates as high as 150 percent, Crowell warns. Simply e-filing taxes and taking advantage of the IRS direct deposit can result in receiving a tax refund within five to 10 business days with no fee, she says.
Another area of vulnerability for taxpayers is the accuracy of the tax preparation by companies offering rapid refunds or refund loans, Crowell says.
"If there is an error in that preparation, IRS looks for the taxpayer, not the tax preparer."
Nationwide, the Center for Responsible Lending estimates that high-cost tax-related services collect about $11 billion every year from 30 million households.