County Urges Caution with Tax Refund Loans; Offers Free Tax Preparation Assistance
March 15, 2010 - (RealEstateRama) — With the filing date for federal and state income taxes one month away, Montgomery County’s Community Action Board recommends that consumers avoid Refund Anticipation Loans (RALs). These highly advertised loans can subject consumers to high interest rates, additional fees and repayment risks.
County residents who need income tax preparation assistance are encouraged to make an appointment with the Voluntary Income Tax Assistance Program (VITA) offered by Montgomery County’s Community Action Board. Electronic filing helps taxpayers avoid costly fees, and customers usually receive their refunds within a week or so, with the potential of preserving needed money to meet the daily costs of living for things such as food, utilities and housing.
Refund anticipation loans (RALs) are one- to two-week loans made by banks, facilitated by tax preparers, and secured by taxpayers’ expected tax refunds. However, if tax refunds do not arrive as expected, taxpayers are responsible for the unpaid debt.
According to a new report by the National Consumer Law Center and Consumer Federation of America, consumers in the United States paid an estimated $738 million in “RAL” fees in 2008 — essentially borrowing their own money, often at high interest rates — to get quick cash for their tax refunds. The report notes that the APR for a typical RAL of $3,300 is 72 percent.
Refund anticipation loans drain hundreds of millions of dollars from the pockets of the working poor, with companies often targeting recipients of the Earned Income Tax Credit (EITC), a refundable credit intended to boost low-wage workers out of poverty. An analysis by the Brookings Institution found nine percent of Montgomery County tax returns filed in 2006 received the EITC.
“The Earned Income Tax Credit remains the largest and most effective federal anti-poverty program,” said Pamela Luckett, chair of the County’s Community Action Board, noting “without the EITC, the poverty rate among children would be nearly one-third higher.”
To make an appointment through Montgomery County Community Action Agency’s free tax assistance partnerships, call:
• Silver Spring - 301-565-7451
• Gaithersburg – 301-258-6395, #6
• Rockville – 240-314-8310
• Takoma Park/East Silver Spring – 301-565-7675
To find free community and military-sponsored VITA programs, call the Internal Revenue Service at 1-800-829-1040. For information on free tax help for seniors, call the RSVP-AARP Tax-Aide Program at 240-777-2577.
Media Contact:
Mary Anderson 240-777-6534
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Of course these products target lower-income people because they are the ones that need money now while higher-income people can afford to wait. And if you go to a reputable company, the fees and interest aren’t nearly as much as the media and bloggers say. And to show out of touch they are, this article is writing about RALs in March. If people want their money fast, why would they wait until March to file - DUH! Thanks for the timely warning there Radar! How come it costs me 10X as much to send a letter UPS as the post office or my ATM charges me a fee to withdrawl “my money.” Because time is a function of money and money is a function of time. Getting a RAL is stupid most of the time, but not ALL of the time as some people do need them. Just make it so the product is offered ethically. Also, why go after tax companies that do this once a year and leave check cashing places alone that do the same thing year-round?