Dear Consumer Ed:

I’ve seen ads for Refund Anticipation Loans from some of the tax preparers.  Is this really a better, faster way to get my tax refund?

Consumer Ed says:

A Refund Anticipation Loan is a short-term loan in the amount of your expected tax refund, less interest and fees that you must pay the lender or tax preparer.  The advantage is that you can get your money in as little as 24 hours.  There is a downside though, and it’s pretty steep.  First, these loans come with fees and high interest rates. For example, studies by the National Consumer Law Center and Consumer Federation of America show that during 2008, American taxpayers paid approximately $806 million in fees charged in connection with these loans. Another downside is that if your tax refund is less than the anticipated amount, you are still responsible for the full amount of the loan.

A smarter alternative is to e-file your taxes and request the refund via direct deposit. This allows you to get your refund deposited directly to your bank account in about 8 to 10 days.  If your adjusted gross income is $58,000 or less, you can e-file your federal taxes for free. For more information, go to www.irs.gov.

The Volunteer Income Tax Assistance Program (VITA) offers free tax help to people with low to moderate incomes (generally, $49,000 and below) who cannot prepare their own tax returns. VITA sites are generally located at community and neighborhood centers, libraries, schools, shopping malls, and other convenient locations. Most locations also offer free electronic filing. To locate the nearest VITA site, call 1-800-906-9887.

The Tax Counseling for the Elderly (TCE) Program provides free tax help to people aged 60 and older.  Trained volunteers from non-profit organizations provide free tax counseling and basic income tax return preparation for senior citizens.  AARP offers the Tax-Aide counseling program at more than 7,000 sites nationwide during the filing season.  For more information on TCE, call 1-800-829-1040.  To locate the nearest AARP Tax-Aide site, call 1-888-227-7669 or visit AARP's website at www.aarp.org.

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