Think Twice Before You Take Advantage of an "Instant or Quick Refund"
by: Iowa Legal Aid
March 2004
What are "instant or quick refunds"?
Instant refunds, quick refunds or similar terms might be used to describe a Refund Anticipation Loan. Refund Anticipation Loans (RALS) are high cost loans offered by paid tax preparers through banks and other lenders. The loan can cost you $100 or more. Imagine paying $100 to get your money just a few days faster.
What if the IRS doesn't allow my entire refund or seizes my refund and I took out a loan?
You will most likely owe the lender the amount of refund borrowed plus interest.
Why might the IRS not allow my entire refund?
If there was an error in calculating your refund, if the IRS thinks you claimed a deduction or credit improperly, the IRS may reduce or eliminate the refund you were expecting.
Why might the IRS seize my refund?
The IRS can seize your refund for a number of reasons. The most common are child support debts, defaulted student loans or past due tax bills from previous years.
What if a different lender claims I owe money for a past RAL or debt?
The loan agreement may allow the bank that is lending you the money for your current refund to pay an old debt. You don't even have the opportunity to dispute the debt. Now you have a new debt with the current lender and the money you were expecting to use to pay the rent or buy a car is gone.
What are the alternatives?
You can visit a local Volunteer Income Tax Assistance (VITA) site. This is a great option for low-income taxpayers. Most VITA sites offer electronic filing. Choose to have your refund direct deposited and you may get your refund in as little as 10 days.
Where do I find out more about free tax preparation sites?
You can call 1-800-829-1040 for a nearby VITA site or call the AARP at 1-877-227-7844 to find a local AARP tax assistance site. You may also contact Iowa Legal Aid for details. Call 1-800-532-1275 or visit http://www.iowalegalaid.org on the Internet for the toll-free telephone number of the office serving your county. Information is available on the Earned Income Credit and Refund Anticipation Loans. Iowans may also be able to get help with the Earned Income Credit or a tax controversy through Iowa Legal Aid's Low-Income Taxpayer Clinic at any Iowa Legal Aid office.
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