No more tax refund loans after this year

By Bahiyah Shabazz, MBA

Another twist is occurring to receiving your money, but before you call the troops for help, loans on tax refund checks are not ideal. It’s amazing how people are excited about receiving a large amount from the IRS.  Let us put the scenario into perspective. It’s your money. 

When you file it’s actually claiming the money that was given by you to your government.  The amount that is withdrawn {pretax} from your paycheck depends on the exemptions claimed on your W-4 form.

Income tax is one of the major taxers that most people pay. The U.S. Constitution gives the federal government the right to collect taxes for several reasons, including waging war, borrowing money and providing services. In addition, most state governments collect income taxes that they use for many of the same reasons, which include providing some vital services to taxpayers.

Yes, it’s your duty to “serve” your country. However, when taxpayers pay a loan fee to borrow their money it is horrific.

This is the last year that taxpayers can receive a Rapid Anticipation Loan on their refund. Before you cry a river…you were paying fees and high interest rate ON YOUR MONEY.

This is the last tax season that any banks will be offering “refund anticipation loans,” according to the National Consumer Law Center.  The loans, called R.A.L.’s in the industry, are short-term, repaid with a borrower’s income tax refund. Typically, the loans carried fat fees and were marketed through tax-preparation outlets to lower-income borrowers who wanted fast cash.

Recent action by federal regulators means that just one bank, the Republic Bank & Trust Company of Louisville, Ky., is offering the loans this tax season. But it won’t be doing so next year, under a settlement with the Federal Deposit Insurance Corporation. (It’s possible that some smaller payday lenders, which until recently haven’t had much federal oversight, may still offer some version of the loans.) This year, according to the consumer law center, filers who get a $1,500 refund anticipation loan from Republic through the Jackson Hewitt tax preparation chain will pay $61.22, which translates into an annual percentage rate of 149 percent for a 10-day term.

If you are desperately in need of your tax refund opt to have the check direct deposit into your checking or savings account.  For those who are not on board with financial institutions, your tax consultant should discuss depositing your tax refund on a debit or prepaid card.

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“Love yourself enough to support yourself.”

© SMG, LLC

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