What are Rapid Tax Refunds?
Rapid refunds are also known as refund anticipation loans (RAL). They are offered by some commercial tax services.
What are the Risks in Getting a Rapid Refund?
Rapid or “instant” refunds are really loans. In order to receive their money early, consumers are charged a loan fee ranging from $30 to $200. The Annual Percentage Rate (APR) on these loans can range from 40% to over 700%. Electronic filing fees and fees for tax preparers can also be added which can end up costing you 10% or more of your total tax refund. In addition, since the refunds are loans, they must be repaid if the Internal Revenue Service (IRS) delays or denies you a refund or gives a refund that is smaller than you expected.
How to Avoid Paying the High Cost of a Rapid Refund
To avoid paying unnecessary fees for a rapid refund, consider any of the following options:
For more information on what you should know about Rapid Tax Refunds, visit the website Investopedia:
How to Avoid Fraud
The IRS is targeting identity theft regarding refund fraud, for more information, visit: https://www.irs.gov/uac/Tax-Fraud-Alerts
To Find Providers in Connecticut’s Community Resources Database:
Search by service name: Tax Preparation Assistance
SOURCES: Center for Responsible Lending, Consumer Federation of America, Investopedia
PREPARED BY: 211/pt
CONTENT LAST REVIEWED: January2021