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Tax Refund Loan Cautions

January 11th

As tax season approaches we all begin to think about the outcome of our filing for the 2011 year. Will we be getting money back? Will we owe the IRS? and What about my old tax debts? All of these questions become highly important as we begin to crunch the numbers.

One aspect of tax season that is becoming increasingly popular for many are tax refund loans. While these loans are not inherently bad, there are a few things to consider before you accept that loan based on your expected tax refund.

Inaccurate Calculations

The most obvious concern is based on the accuracy of your current tax return. If you accept a refund loanĀ  for the amount you anticipate receiving in your return, you could be setting yourself up for bigger problems. If there are any inaccuracies, or the IRS disputes your refund calculations, you will still be liable for repaying that loan in the full amount.

Repayment Terms

What many people fail to consider are the details behind the terms and conditions of these loans. It isn’t uncommon for these loans to carry high interest rates, large penalty fees and even charge up-front fees for processing the loan. In some cases, you may still be liable for a 10-20 percent fee simply for accepting the loan even if you repay it as soon as your tax refund is returned. Further, if you default on your repayment schedule you can expect to see huge fees and costs associated with non-payment, even if the delay was the fault of the IRS.

 
 
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