Springboard Advises Consumers to Beware Refund Anticipation Loans this Tax Season

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Tax Refund Anticipation Loans, commonly known as RALs, are a ripoff.

It’s that time of year for consumers to file their taxes and many may decide to go to a tax preparing company in order to do so. However, Springboard Non-Profit Consumer Credit Management advises consumers to avoid the hard sell by tax preparing companies that try to persuade you to receive a Refund Anticipation Loan (RAL).

RALs may seem like a fast refund (“Fast Cash Refunds” or “Instant Refunds”), but “RALs are similar to payday loans - they are very expensive short term loans with high fees that equate to astronomical interest rates,” said Dianne Wilkman, President/CEO of Springboard. Despite their low “default” rate, RALs are high cost loans that are repaid by your tax refund from the Internal Revenue Service (IRS). For example, with a refund of $2,000, a RAL consumer might pay a $75 loan fee, a $40 electronic filing fee, a $100 tax preparation fee and possibly even a $42 check cashing fee. The grand total is $257, which is approximately 13% of this refund. The short term loans represent no risk to the issuer, since they are secured by the tax refund.

Some tax preparers target working families in low income neighborhoods that can claim the Earned Income Tax Credit (EITC). The EITC is meant to increase working families’ incomes.

To avoid applying for a RAL, Springboard encourages consumers to consider the following:

·Electronic filing - File online and avoid the traditional paper filing through the mail. If consumers “e-file” they can avoid unnecessary delays of their tax refunds in as little as 10 days versus the six weeks for returns filed by mail.

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·Educate yourself - Take control of your taxes and get tax smart. To help navigate new tax law changes and provide new information and resources to maximize savings, Springboard recommends that consumers clip tax tips from newspapers & magazines, obtain a tax preparation checklist and learn how to organize and file their taxes. The internet has many excellent resources.

·Utilize tax software - Look into tax preparation software, such as TurboTax, to help identify deductions you may have not known you qualify for and the program does the calculations for you. Tax preparation software can make doing your taxes faster, easier and more convenient.    

·Use your refund wisely - Once you get your refund put it to good use. Pay off credit cards or build up an emergency stash. Do not give in to the impulse to pay for vacations, home entertainment systems or high priced appliances.

·Best tip of all: don't get a refund! That's right, reduce your withholding and keep your money throughout the year, paying off more debt or putting it into savings. Don't let them get it in the first place.

Springboard offers low cost tax prep services and is an approved e-filer with the IRS. Call Springboard Nonprofit Consumer Credit Management at 1-800-WISE PLAN (1-800-974-3752) for more information regarding safe tax filing and also to safely prepare your taxes.

About Springboard Nonprofit Consumer Credit Management

Springboard, a nonprofit credit counseling and education organization founded in 1974, offers assistance with money management and budgeting through confidential counseling, debt management and education programs for financially troubled consumers. Springboard is accredited by the Council on Accreditation of Services for Families and Children, signifying high standards for agency governance, fiscal integrity, counselor certification and service delivery policies that ensure low-cost confidential services performed in an ethical manner. Springboard is a member of the National Foundation for Credit Counseling and the Association of Independent Consumer Credit Counseling Agencies. Springboard has counseling locations throughout Southern California offering face-to-face, online and nationwide phone counseling services.

For more information on Springboard, call 1-800-947-3752 ext. 702 or visit their web site at http://www.credit.org.

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