Released: March 04, 2005

Watch For Costs Linked to Tax Refund Loans

MANHATTAN, Kan. – An offer for quick cash -- an income tax Refund Anticipation Loan (RAL)for example – may be tempting. Paying to borrow your own money will diminish the value of your refund, said Kansas State University Extension agent Jennifer Wilson.

“According to the National Consumer Law Center, loan costs for a typical RAL range from $35 to $115. Tax preparers may tack on an administrative fee that averages $32 and also offer to deduct the tax preparation fee from the refund,” said Wilson, who is the Riley County youth, family and community development agent for K-State Research and Extension.

Same-day service will cost still more – the additional fees usually range from $20 to $40.

“While fees vary with the amount of your refund, the equivalent annual percentage rate (APR) for the short-term loans ranges from 40 to 700 percent,” she said. “That’s significantly higher than standard home, auto or credit card rates.”

Here’s an example, using a $2,000 tax refund:

• RAL loan fee: $ 75
• Income tax preparation: $100
• Electronic filing fee: $ 40
• Total fees: $215, leaving a refund of $1,785.

To reduce income tax preparation costs and speed a refund, Wilson offered these tips:

* Check to see if you are eligible for the IRS Volunteer Income Tax Assistance (VITA) program or similar volunteer tax services offered by area service agencies or the American Association of Retired Persons (AARP).

* File electronically to save mailing time and costs.

* Opt for direct deposit, which may make refund dollars available in eight to 16 days.

* File early to avoid the last-minute rush that will slow the process.

For more information on tax help available in your community or managing money successfully, contact the local K-State Research and Extension office.

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K-State Research and Extension is a short name for the Kansas State University Agricultural Experiment Station and Cooperative Extension Service, a program designed to generate and distribute useful knowledge for the well-being of Kansans. Supported by county, state, federal and private funds, the program has county Extension offices, experiment fields, area Extension offices and regional research centers statewide. Its headquarters is on the K-State campus, Manhattan.

Story by:
Nancy Peterson
nancyp@oznet.ksu.edu
K-State Research& Extension News