Refund Anticipation Loans (in anticipation of April 15!)

by Leigh Graham · 2009-01-29 12:00:00 UTC
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We're all about Minnesota today.  MN Public Radio has a terrific feature on a non-profit, AccountAbility Minnesota, that is providing free tax prep for moderate- and low-income residents.  Programs like this operate nationwide, and are especially helpful at identifying filers who qualify for the Earned Income Tax Credit.  Demand is way up for tax prep assistance this year, as more people are facing depressed wages and a greater possibility of being entitled to the EITC.

Like others, AccountAbility Minnesota also offers low-cost Refund Anticipation Loans (RAL) as an alternative to the predatory versions from H&R Block and other for-profit tax prep companies, which often have interest rates as high as 500%.

"The IRS found that refund anticipation loans diverted more than $8 million from taxpayer refunds in 2007. Because they are targeted at low-income people, the IRS calculates they have drained more than $2 billion in Earned Income Tax Credits that should have gone to the working poor."


"In the past three years, [AccountAbility MN has] saved taxpayers about $300,000 that they would have spent on refund anticipation loans."  They also offer free savings accounts for filers without bank accounts so they can enjoy a quicker return through direct deposit, which reduces their need for a RAL.

The Center for Responsible Lending has more information on RALs and other predatory lending practices that disproportionately harm people of color, women, rural households, and even military families.  If you are an accountant or tax attorney or just a skilled tax preparer, consider volunteering to help low- and moderate-income families file their returns this year and claim the Earned Income Tax Credit if they're eligible.  It is one of the few popular federal anti-poverty programs we have!

Leigh Graham
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