Tax Time!

Refund Anticipation Loans (RALs) are short-term loans offered through tax-preparation agencies as a means for consumers to receive their tax refunds early. Rather than waiting to receive their tax refunds, consumers receive money up front by paying a fee ($50-100), and the tax refunds go towards repayment of the loan.

This spring, H&R Block announced that they will no longer be offering RALs. This comes because the IRS announced that they will no longer provide tax preparation centers with a debt indicator (essentially a credit check) which the tax prep centers use to determine the consumer’s risk level. Instead, H&R Block plans to offer Refund Anticipation Checks (RACs). RACs are being used as a way for those without bank accounts to receive tax refunds when H&R Block files your return electronically. Rather than receiving their refund in the mail, consumers receive the refund (minus any fees), via one of three ways: a prepaid Mastercard, direct deposit, or via check (for an additional fee).

The important thing to note here is the amount of time it takes to receive a refund. With the RAL program, consumers can access their money faster because of the loan, although they are paying high fees for this service. With the RAC program, consumers still must wait 8-15 days to receive their refund, in addition to paying a fee. A consumer can electronically file taxes on their own, or through a free tax preparation site, and receive the refund in the same amount of time without paying any fees. For those who do not have access to a bank account, it may be less expensive to pay a check-cashing fee than to pay preparation and processing fees that may be charged through one of these services. Adapted from redtape.msnbc.com

Many communities offer sites for free tax preparation. If you are in the St. Louis Metro Area, please visit the link below to see if you qualify, and to find a date and time that works for you to file your taxes!

http://www.gecc.us/15302.html

Nationally:

http://www.cbpp.org/eitc-partnership/state-links.htm

After filing your taxes, take some time to plan what you might do with your refund. Think about your emergency fund, money you may owe to creditors or family members, and doing something fun for yourself and your children. We can use our refunds to work towards the vision that we have for our future, and to do a little something nice for ourselves now!