For most Americans, instant gratification is their mantra…even in tax season. While driving around this year, I noticed signs on every corner for “Rapid Refund.” I spent some time researching and speaking with a number of tax accountants. A “Rapid Refund” is a short term loan that is secured against your forthcoming refund. The catch is that all loans come with costs, and hefty ones at that. These refund anticipation loans (RAL’s) come with an application fee and an interest rate from 36% to 200% or more. On a refund of $2,000, the cost can be upwards of $100. It’s estimated that in the 2006 tax season, 9 million taxpayers used a RAL. Additionally, RAL’s cost the working poor an estimated $500 million per year. The IRS does not regulate these loans.
To expedite your refund, you can do an electronic filing and have the refund direct deposited to a bank account. Within 10-14 days, your refund is in your account. The way I see it, you have already waited 365 days to receive your tax refund, so what’s another 14 days? In order to correct this problem for the next year, you can contact your Human Resources department and update your W-2 income withholding. This will give you more money in each of your paychecks throughout the year. Plus, the government is no longer receiving a free loan until you file your tax return.
Wishing You Wealth in all it’s Greatest Forms,
Alex
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