A new concept has been introduced to the tax season called the refund anticipation loan. You may have seen some TV commercials offering this service. In the past, people have prepared their taxes, sent the information off to the government and then waited for a check or a direct deposit to arrive. However, some tax preparation services are offering to give you the money in just 1-2 days but the catch is that it is a loan. The loan period lasts about 10 days which results, effectively, in an astronomically high interest rate. The tax refund is your money, but by opting for this choice, you will eventually be paying a big chunk of that refund to your tax service. It would be wise to use some caution and figure out the costs and benefits ahead of time before you agree to this.

Overall this predatory lending practice is estimated to cost Americans as a whole about 500 million dollars a year. Unfortunately poor people tend to be affected the most because they have a greater need to get their money as fast as they can. Those targeted most tend to be recipients of EITC, the Earned Income Tax Credit. They recently accounted for 55% or refund anticipation loans. The program, formed in 1975 to help low wage workers is being undermined by tax preparation services that are eating away at these refunds. Refunds that are being awarded based on the EITC cornerstone that qualifiers for EITC get most of the federal taxes refunded at an attempt to relieve poverty for hard working people.

It may seem silly to a lot of us when people pay nearly a quarter of the amount of their tax refund just so they can obtain their cash in one or two days rather than the standard 10 days after they electronically file directly with the IRS. However, most of us don't really understand how desperate some people feel when trying to get by on a low income.

We must teach people that they needn't give up the money that is rightly due to them. Employers allow workers to change W-4 forms and adjust the withholding amounts so they match their tax responsibilities more closely. In that way, people are not giving away their wages via taxes over the course of the year without cause at the outset. People must also be informed that filing online is free for most people now. With the direct deposit option, it takes a mere 10 days for the refund to arrive.

If your financial life is difficult its important to weigh the benefits and drawbacks of getting money fast vs. getting more money by waiting only 8-9 more days. Free filing is available to those who qualify using the criteria that can be found at www.irs.gov. Assistance from the Volunteer Income Tax Assistance program is available for people with incomes less than $35,000. VITA can be reached at 800-829-1040 with sites around the country. Keep what is yours- don't let H&R Block or Jackson Hewitt keep part of your hard-earned income. Explore your options and be patient- it might save you a couple hundred dollars or more.

Ron Finkelstein is NOT a Tax Attorney or an accountant. He is merely a small business owner who has paid a lot of money over the years to learn a whole lot about Taxes and Time Management.

If you enjoyed this Tax Refund Loan Consumer Advisory, you should check out more Tax Advice and How to get Free Tax Software