Susan Tompor: Lower-income households may go for high-cost products from preparer
January 31, 2013
For many people living paycheck-to-paycheck, a big, fat federal income tax refund just cannot arrive soon enough.
This season's tax refunds, though, are going to be one week late because the Internal Revenue Service couldn't begin processing the vast majority of returns until Jan. 30. Blame Washington for dragging out the fiscal cliff debate and tinkering too long with the tax code.
A week might not mean much to some. But many lower-income households could be more tempted to jump at fast-cash products offered through a tax preparer.
Consumer advocates are pleased to report this is the first year in decades that overpriced refund-anticipation loans will no longer be available from banks on a large-scale basis.
Even so, some high-cost products remain for getting cash quicker.
Liberty Tax Service, for example, has a refund-transfer product called its Instant Cash Advance. A taxpayer could apply if he or she has at least a $1,500 federal tax refund.
In Michigan, the taxpayer would pay about $101 in fees and interest for a $1,700 loan via Liberty's Instant Cash Advance. The cash would be in the customer's hands 24 hours to 48 hours upon approval. That's one Benjamin out the door just to get some cash about two weeks or three weeks earlier than with typical electronic filing of a tax return.