Can't find your 2005 W-2s to file your tax return and get your refund? No Problem. Just bring in the stub from last year's last paycheck and walk out with a check in hand -- today.
Such messages, such as those airing on Jackson Hewitt TV commercials, cloak a money-sucking tax pit that studies show nearly 11 percent of American taxpayers fall into. They take out a refund anticipation loan (RAL), paying easily $115 and upward to get their money quick.
People should avoid RALs, said David Greenwell, Oklahoma City certified public accountant.
"The rates used are very high, especially when you factor in the fees associated with some loans. Translated into annual percentage rates, they can range to more than 700 percent," Greenwell said. "Unfortunately, some people find themselves in difficult financial situations and think that getting their money as soon as possible is important. Just as unfortunately, there is always someone available to take advantage of people in a distressed situation."
RALs are not available from or regulated by the Internal Revenue Service, said David Stell, Oklahoma spokesman. Most people who turn to them are eligible to get their taxes prepared for free by community volunteers who can electronically file them, Stell said.
People can receive their refund within two weeks and as soon as 10 days if they have it directly deposited into their bank account, he said. That's without paying any money to tax services.
Meanwhile, H&R Block defends the loans as a necessity to many, especially taxpayers without bank accounts.