SLADE COLUMN: Tax refund anticipation loans can be costly

It's tax preparation season, which is a loathsome thought for some, but an opportunity for others who expect refund checks.

It's also, unfortunately, an opportunity for businesses that offer expensive ways for consumers to get quicker access to their refunds.

For Americans with lower incomes, filing federal income taxes could mean a substantial check due to the Earned Income Tax Credit. And nearly half the nation's workers now earn what's considered a low income, according to census data, as those ranks have grown due to the recession.

The tax credit is intended to compensate for federal payroll taxes paid by workers with lower incomes who may owe no income taxes. But it's not just for the poor; a married couple with one child could earn up to $41,132 and qualify.

Many businesses are waiting with anticipation for a chance to get their hands on some of that tax refund money, by charging big fees to consumers who are willing to pay to get their refunds a little bit earlier than they would otherwise, or by charging fees to consumers who don't have bank accounts.

Those who are expecting refund checks would be wise to avoid such products.

If a bank attempted to charge customers a $61 fee to withdraw $1,500 of their own money, consumers would howl with rage (remember how people reacted last year to proposed $5-a-month debit card fees?).

But that's what tax preparers Jackson Hewitt and Liberty Tax Service charge for a refund anticipation loan, and that's on top of an additional $49.95 in bank fees, as well as the charges for tax preparation.

And what does a consumer get, for $111 in fees? A high-interest rate product that makes the tax refund available a week or two early.

The federal government has been cracking down on refund anticipation loans, which generated more than $600 million in fees in 2009.

Due to bank scrutiny and the Internal Revenue Service's recent refusal to confirm refund amounts for anticipation loans, few companies offer them now.

H&R Block has gotten out of refund anticipation loans, and now offers a product that allows customers to get their tax refund loaded onto a prepaid debit card.

Customers could get access to their refund about 10 days early, the company says.

The catch is, each time the customer withdraws money at an ATM using the card, there's a $2.50 fee, plus surcharges if the machine isn't part of the Allpoint network. There's also a $1 fee for checking the balance on the card at an ATM.

If you want to get your taxes done and get any refund you're owed quickly while avoiding unnecessary fees, here's what to do:

--Be aware that most people can file their taxes for free.

The S.C. Department of Revenue, at sctax.org, offers a list of tax preparers offering free online tax preparation and electronic filing of state and federal returns. Free File has income restrictions.

For those who want hands-on help, Trident United Way, Trident Urban League and the IRS have teamed up to offer free tax preparation for families earning under $52,000, at sites across the Charleston region. Visit www.tuw.org or call 211 for information.

--Early filers get refunds faster.

As the April 17 tax filing deadline gets closer, the IRS gets busier. Early filers tend to get refunds more quickly, but the IRS says 90 percent of filers get their refunds in three weeks or less in any case. Those who e-file and have their refunds directly deposited can get refunds in as few as 10 days. The progress of refund checks can be tracked on the IRS website, www.irs.gov, using the "Where's My Refund?" tool.

--Don't be "unbanked."

Many of the high-fee products associated with tax refunds are aimed at people without bank accounts.

Many banks and credit unions offer no-fee checking accounts. So if you're expecting a tax refund and you don't have a bank account, consider opening one and having that refund check deposited directly.