January 18, 2011

Don't pay for an advance on your tax refund

It's that time of year when a lot of us are planning our taxes and, hopefully, estimating how big of a tax refund is coming our way.  Though I'm always one to encourage you to learn to do your own taxes, it's completely understandable that a lot of folks find tremendous value in having somebody else do them.  We've all got busy lives--it's completely understandable.  
What I don't support is getting a cash advance from your tax services company, in lieu of waiting 6-8 weeks for the IRS to send you a check.  Most of them will offer to give you a cash refund in 24 hours for a small $50 administrative fee and then some charge on top of that.  These costs end up totaling $100-$300 and sometimes more.
Just for the sake of simple calculation, let's say your total refund is $1,000, and your advance fee total is $100.  You're getting charged 10% interest for a 6-8 week loan.  That's 60% annually, and a big no-no.  These guys are not doing you any favors by giving you an advance...they're taking your hard earned money!  My recommendation would be to go ahead and get your taxes done early. That way you can get a refund check from the IRS early and move on with your life.  

Take a small amount of the refund and treat yourself to something simple, but try to save as much of that refund as you can and start thinking about next years deductions.

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