CONSUMER ALERT: DON’T PAY TO BORROW YOUR OWN MONEY–RAPID TAX LOANS EXPENSIVE, UNNECESSARY

Attorney General J. Joseph Curran, Jr. warned consumers that “rapid refunds” offered by tax preparation services are really loans that consume an exorbitant amount of the consumer’s refund.

“ Getting an instant income tax refund sounds good, but not when it costs you part of your hard-earned money,” Curran said. “Why pay some company to get your refund a few days sooner, when there are alternatives that won’t cost you anything?”

The National Consumer Law Center reports that “refund anticipation loans” are often marketed to low- and moderate-income workers who receive the Earned Income Tax Credit. These are people who are cash-strapped and find the offer of getting an instant refund hard to resist, but are the very people who can least afford to lose some of their money.

Curran said that taxpayers should check out these low-cost or free ways to file their taxes and get their refunds:

• File income taxes electronically and use direct deposit. You will get your refund in about 10 days.

• If you don’t have a bank or credit union account, open one. You can use it to have your refund direct-deposited, and that also eliminates the expense of having to pay a check cashing fee.

• See if you qualify to have your taxes prepared for free by volunteer tax preparation services. The Volunteer Income Tax Assistance (VITA) Program offers free tax help to low- to moderate-income ($36,000 and below) people who cannot prepare their own tax returns. Most locations also offer free electronic filing. To locate the nearest VITA site, call 1-800-829-1040. The Tax Counseling for the Elderly (TCE) Program provides free tax help to people age 60 and older. For more information on TCE call 1-800-829-1040. The Maryland Volunteer Lawyer Service offers free tax preparation service to low- and moderate income taxpayers. Call 410-547-5637 or 800-510-0050.

• Fill out your tax forms yourself. It may not be as difficult as you think. Get help from the VITA program or from knowledgeable friends or family. Tax forms and publications are available at public libraries and from the IRS for free.

• File electronically for free by using an IRS “Free File” software provider. Go to the IRS website at www.irs.gov to see the list of tax preparation providers that have teamed up with the IRS this year to let many taxpayers file electronically for free. Some of those companies also allow Marylanders to file their Maryland state income tax returns electronically for free as well. Be aware that some of these services, while offering their tax preparation services free, may ask if you want a refund loan. Say no to avoid paying extra.

• Be willing to wait. Even if you file a paper return, you should still get your refund within 8 to 10 weeks.

Curran says that taxpayers using a paid tax preparation service should ask for a breakdown of fees upfront, before the return is prepared–what is the charge for preparing the return, what is the charge for filing electronically, what is the charge for a refund loan, etc–and tell the preparer which of the services they want and don’t want.

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