Posted 10:18 pm Sunday, February 05, 2012
BBB Urges Caution With Your Refund Anticipation Loans
Some tax preparers offer tax refund anticipation loans to allow consumers to receive tax refunds in a hurry. However, BBB advises consumers to be wary of these costly loans, as in most cases, they deliver refunds only slightly faster than the IRS.
Refund anticipation loans are similar to payday loans in that they are short-term loans with high interest rates that can range anywhere from 50 to 500 percent. In some cases, they have hidden administrative fees. If the tax preparer makes a mistake in calculating your refund, borrowers could be required to pay fines and fees too.
Many consumers are in a hurry to get their refunds and may assume that the RAL will be paid off quickly when their refund arrives, but if the refund is less than the loan, consumers will have to repay the difference, plus fees and fines. In the end, RALs may do more harm than good. In some cases, the tax payer may end up owing the tax preparer more than the refund itself.
The IRS typically delivers refunds in as few as 10 days after a consumer files an electronic tax return, making most refund loans unnecessary.
When hiring a tax preparer, BBB advises that you:
Do your homework. Ask for referrals from friends, but also get the whole customer experience by checking the preparer out with the BBB before you hire anyone at www.bbb.org or by calling 903-581-5704.
Check credentials. Is the preparer a certified public accountant (CPA), a tax lawyer or an enrolled agent? Will the preparer sign your return and provide you with a copy? Does the preparer belong to a professional organization that requires members to adhere to a code of ethics?
Be wary of empty promises. Until the preparer knows your situation, there is no way to know whether you'll get a refund or how big it will be.
Make sure the preparer is accessible. You may need to contact your preparer after tax season is over. Will he or she be available?
Read the contract. Know what the service will cost, what it covers and whether the cost changes if you have a complicated return. Will the preparer represent you in case of an audit?
Check your return. Before you sign the return, read it over to check for mistakes. Ask the preparer to explain anything you don't understand.
BBB also reminds consumers that The IRS doesn't email people about their taxes. The agency typically contacts taxpayers by mail. Tip-offs that an email is fraudulent may include spelling or grammatical mistakes. The BBB advises consumers not to open any attachments or click on links in emails, as phishing emails claiming that there are issues with refunds, that they being audited or that there's a delay due to lack of information are abundant during tax season. Many include a link to a website set up by scammers, where victims are asked for Social Security numbers, bank account or credit card information. Some sites are designed to automatically install viruses or other malicious software on the victims' computers. Please don't fall for it.
