Search      Tips on Searching Find Legal Help On Loans, Student Loans, Installment Purchases Related Resources The Basic Rules of Credit Cards By: Iowa Legal Aid Payday Loans: An Expensive Way to Borrow Money By: Iowa Legal Aid Utility Customers Are Entitled to Reasonable Payment Agreements to Pay High Utility Bills By: Iowa Legal Aid more...

December 2003

Paying fees for tax preparation and a refund anticipation loan is like losing four days' pay.

Some commercial tax preparers offer Refund Anticipation Loans, these are high cost loans. These loans promise to get your money from your refund to you faster. What you may not realize is that you are paying a lot to get your check only a few days faster. 

Example of a typical costs for commercial tax service including a Refund Anticipation Loan from last year:

Refund:$4729	(Earned Income Credit, Child Tax Credit and Refund of taxes paid )
Tax Preparation	$229.11 (or the equivalent of four  and Loan fees: days' pay at $7.15 an hour)

Refund Anticipation Loans become even more costly if the IRS denies your refund or seizes your tax return. If you owe on past taxes, child support or other state/federal debts your tax refund could be seized. If your refund is denied or seized you will have to repay the refund anticipation loan at a very high interest rate. If you owe money to the bank that you are getting the Refund Anticipation Loan they will take (offset) your refund and you may get nothing.

There are alternatives.

HOW TO AVOID REFUND ANTICIPATION LOANS:

• By e-filing your taxes and having your money deposited directly to your bank account you can get your refund in as little as ten (10) days. VITA and AARP offer free tax preparation in many sites around Iowa.
• Start Early.  In January, call to find out if there are any nearby free tax preparation sites.  Many free tax preparation sites run by VITA and the AARP offer e-filing. Call 1-800- 829-1040 to find a VITA site or 1-877-227-7844 to find a local AARP tax aide site.
• Your employer should have your W-2's to you by February 1. Plan to visit your free tax site or make an appointment as early in the season as possible.
• If you qualify for the Earned Income Credit, consider using the Advanced Earned Income Credit option. You may be able to get a portion of your earned income credit in each month's paycheck.

OTHER TAX TIPS

• If you use a commercial tax preparer, make sure that they explain all of the charges for their services to you.
• No matter who prepares your return, make sure the preparer explains why you are entitled to any exemptions, deductions or credits.
• If someone prepares your return for you, make sure they sign it. If they won't, chances are there is something wrong with the return.
• To find out more about Refund Anticipation Loans, Earned Income Credit or Advanced Earned Income Credit, call Iowa Legal Aid's Low-Income Taxpayer Clinic at 1-800-532-1275.   In Spanish 1-800-272-0008.