KNOXVILLE (WATE) – Millions of people, expecting money back from the IRS, will turn to refund anticipation checks this year. Many are eager to get their money quickly to pay for rent, medical bills or pay off debt.
Evelyn in Knoxville asks: “Should I think twice before considering a quick refund? Are there alternatives?”
If instant cash from the Internal Revenue Service is more of a desire for you than a need this early in this tax season, there are some alternatives to a refund anticipation check.
In the past, refund anticipation loans, or RALs, enticed millions to get very high interest loans for the estimated amount of their refunds. You can’t get them today because federal regulators cracked down on these loans after finding federal and state lending rules were not being followed.
Tax preparers have partnered with financial institutions this year to offer refund anticipation checks, or RACs. With them, you pay a fee to get your own money.
Consumer advocates say a refund anticipation check is a costly short term loan of the tax preparation fee.
However, if you file electronically with the IRS, you’d get your money almost as fast as you would with a refund anticipation check, without paying any fee.
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The IRS is partnering with tax preparers and software companies to offer free online tax preparation services. They call it Free File and it’s available to you if you have an adjusted gross income of $60,000 or less.
With its free filable tax form option, anyone, regardless of income, can go online and receive blank forms you can use on your computer and file directly with the IRS, rather than filling them out by hand.
The IRS says the fastest way to get a refund is to e-file your return and choose direct deposit. Having your refund check depostied directly into a bank account cuts the time you have to wait for your tax cash. It is also added protection against theft if it’s sent by mail.
Whether the tax money you want quickly is for needs or wants, financial experts usually advise patience. Ultimately, a refund anticipation check is a personal preference. If you can hold off your refund appetite for just a few days, then you and your bank account may be better off.