Tax preparers often offer Refund Anticipation Loans to allow you to immediately receive your tax refund. However, RALs are not an actual refund from the IRS but are a short-term loan from the company. According to the Consumer Federation of America, the interest rate and administration fees on RALs can range from 40% to over 700% of your refund. Refund Anticipation Loans may do more harm than good and just aren't worth the instant access they provide. It's a lot of money to spend to borrow your own money for two weeks. To avoid RALS:
· Work with debt collectors and let them know a refund is on the way.
· Consider filing your taxes electronically and requesting to have your money direct deposited. While this entire process usually takes 10-14 days, you will receive 100 percent of your money and not have another loan to pay off as you would with a RAL.
· The IRS is working to eliminate RALS. In 2011, they stopped providing tax preparers with a debt indicator notification which was used by tax preparers to decide which customers to offer a RAL.