Tax Refunds

During tax time do you hope for a refund to pay off those holiday bills?Are you thinking of going to a tax preparation company that offers "Instant Refunds?"   Why wait to get your tax refund when you can get it now? Two reasons:

Unnecessary Fees  While it sounds good to get your tax refund instantly, consumers need to be aware of the fees involved. Basically, the company is issuing a loan for the amount of your anticipated refund and your refund goes to them to pay off this loan. Not only will you pay the fee for doing your taxes but if you sign up to receive your money instantly, you will generally pay $100 or more for this convenience.
For example, on a typical $1,500 tax refund, one tax preparation firm charged $60 to file the federal form, $15 to file the state form, $64 loan fee and $24 for getting your money now. This means you will be paying $75 for them to fill out the forms that are fairly easy and you could do on your own. It also means that you pay $88 for the convenience of having your money now -- that's 6% of your refund. If you waited the usual 8-10 days that $88 would be in your pocket.

Higher Costs  Also, many of the tax preparation companies are partnering with other businesses, such as car dealers, rent to own centers, even mortgage companies. Before agreeing to have your refund used to buy a car or other products, be sure you find out how much that privilege is going to cost you -- it makes better financial sense to get your refund on your own and negotiate for whatever product you want without the issue of your refund muddying the waters.

If you want to save money, you can consider the following alternatives:

  • File Early - to get your refund as fast as possible, file as early as possible.
  • E-File Your Return - make sure you file your return electronically and request direct deposit of the refund to your bank account or to a low-fee prepaid card.
  • Paper-File Your Return and Request Direct Deposit

With direct deposit, the IRS issues most deposits within 21 days. 

Alternatives to Paid Tax Preparation Services

Qualifying taxpayers can get their taxes prepared for free. The services available include:

  • The IRS’s Volunteer Income Tax Assistance Program (VITA) for taxpayers with incomes of $56,000 or less, taxpayers with disabilities and those who speak limited English.
  • The IRS’s Tax Counseling for the Elderly Program (TCE) uses IRS-certified volunteers who specialize in tax matters related to pensions and retirement issues. There is no age requirement, but the program is generally intended for those who are 60 or older.
  • The IRS’s Free File Software is available to taxpayers whose income is $69,000 or less. (State returns may still incur a small fee.)
  • AARP Tax-Aide sites are available free to taxpayers with low and moderate income, with special attention to those 60 and older. To find a site during the tax season, call 888-AARP-NOW (888-227-7669) or visit

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