Just say no to Refund Anticipation Loans

Back in the days when electronic filing didn't exist, there was a good market for Refund Anticipation Loans (RALs). It took several weeks (or maybe even months) to get your tax refund, depending on when you filed your taxes. The RALs were offered by tax preparers who would do your taxes, figure out your refund, and offer to give you money right then and there. In exchange for a fee, of course. The taxpayer could access the refund right away via this type of loan, and the tax preparer got paid back when the refund was actually issued.

Since electronic filing is so widespread, there is no longer a need for Refund Anticipation Loans, although they're still being offered and heavily marketed. In most cases, you'll get your refund in less than two weeks if you file electronically. Depending on which day of the week you file, you might even get your refund in a week or less. And electronic filing is usually free!

RALs are so ill-advised because they're expensive. The fee for one of these loans is typically $50 to several hundred dollars. That's a big chunk out of your refund. In 2007, well over 8 million taxpayers used RALs and paid almost $900 million in fees for the privilege of doing so.
If RALs are such a bad deal for consumers, why do so many use them? Most likely because they're not aware that they could get their refund very quickly simply by electronically filing their tax returns. This product targets the low-income and ill-informed, who often feel a need to get their hands on quick cash at any cost. And those selling the RALs aren't likely to volunteer the truth about electronic filing and talk themselves right out of additional fee income.

Spread the word: Refund Anticipation Loans are a waste of money and almost completely unnecessary these days.

Forensic accountant Tracy Coenen investigates corporate fraud and consumer scams, and is the author of Expert Fraud Investigation and Essentials of Corporate Fraud.

The 10 Most Overlooked Tax Deductions

Don't overpay taxes by overlooking these tax deductions. See the 10 most common deductions taxpayers miss on their tax returns so you can keep more money in your pocket.

Read More

Brought to you by TurboTax.com

How to Find a Good CPA for Your Taxes

Finding a good CPA for your taxes is simple with these seven tips: 1. Ask about their specialization; 2. Verify their identification number, 3. Look up their license, 4. Consider their experience, 5. Confirm their willingness to sign, 6. Ask for advice, and 7. Determine their fees.

Read More

Brought to you by TurboTax.com

Reporting Self-Employment Business Income and Deductions

Self-employed taxpayers report their business income and expenses on Schedule C. TurboTax can help make the job easier.

Read More

Brought to you by TurboTax.com

2018 Tax Reform Impact: What You Should Know

Congress has passed the largest piece of tax reform legislation in more than three decades. The bill went into place on January 1, 2018, which means that it will affect the taxes of most taxpayers for the 2018 tax year.

Read More

Brought to you by TurboTax.com
Read Full Story
Your resource on tax filing
Tax season is here! Check out the Tax Center on AOL Finance for all the tips and tools you need to maximize your return.