Tax expert says beware of refund loans

Tax expert says beware of refund loans

WICHITA FALLS, TX (TNN) - Tax season is just around the corner and with the government shutdown entering another week, one Wichita Falls tax expert is encouraging people to avoid or at least pay close attention to refund loans being offered.

Every year during tax season, Genevieve Anderson the director for the VITA program sees people spending their hopeful refund before the cash is ever in their hand.

"She busted into tears in the middle of the tax office," said Anderson. "She said 'I already spent this money. I just knew I was getting this kind of a refund.'"

She also sees other people who file their taxes and want their refund fast. So, they borrow money through rapid refunds or a refund advance loan.

"I see at least five people, some years, ten people come in here going 'I took this and it caused me a problem.'"

That's why the VITA program director is encouraging people to pay close attention and really understand what you're agreeing to before signing the dotted line.

"One is the old school way, lots of fees and lots of interest and if there is anything wrong in your return, if there is any reason the IRS decides that you don't get that full amount of money, then you end up having to pay high interest fees back to the person who did your return because they gave you the advance money," said Anderson.

On the other hand, the advance refund loan doesn’t have interest attached to it. Anderson said if your refund is not accurate for some reason, you will still have to pay them back.

"Know what fees are associated with it," said Anderson. "Know what interest is associated with it."

Even though she believes the government shutdown will not cause a big delay in tax refunds, Anderson is afraid people will panic and apply for these loans.

"There is a lot of fear and yes it does drive people to go, 'Oh my I need my money now anyway I can get it,' but to me that just leads to more potential problems in the future," said Anderson.

Instead, she recommends being patient. She also said the IRS will start accepting refunds January 28.

"You've been without this money for ten months and if you need the money that bad, why would you want to pay somebody to get your money when another two-three weeks from now it's going to be in your pocket," said Anderson. "It's all going to be in your pocket because it's all yours."

The VITA program provides free Income Tax preparation for low to moderate income taxpayers making less than $64,000 a year. To schedule an appointment or learn more about this program, click here.

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