Saturday, February 21, 2009

How To Rapidly Lose Your Refund

The smiling idiot on the street outside of H&R Block waves a fistful of money at the camera: "I got my refund, FAST!!"

The beaming young woman drives off in her car waving her own fan of money- "I didn't wait for my refund! I went to H&R Block and I got it FAST!"

Here's how Rapid Refund "Services" really work: First off, you are not getting your refund quickly. You are getting what amounts to a LOAN based on H&R Block's (or Jackson-Hewitt, or whoever's) determination of what your refund will be. And this loan is coming at a huge price- typically not a flat fee, but a figure based on a percentage of your "anticipated" refund amount. It's not at all unusual for people desperate for their money to hand over hundreds of dollars for the "convenience" of getting "their" money now, rather than just filing and waiting for it to show up within a few weeks (or even a few days, if one files electronically.)

These commercials are especially obnoxious in dire economic times like these- people are struggling to pay their rent, hold on to their cars, put food on the table, etc. Along comes a multibillion-dollar tax preparation company to offer what is essentially a loan at usury interest rates. So maybe you hand over a fourth of your refund in exchange for a loan based on that refund. What doesn't seem to occur to the sad desperate people who use these "services" is that their refund represents an overpayment of taxes, it's not "found money" and it's not a "gift." When you let a tax prep service take a chunk of it in order to get your hands on the balance a few days early, you are just cheating yourself TWICE (the first time came when you overestimated the amount that should be deducted each paycheck, which is why you are getting a refund in the first place.)

I used Turbotax to file my state and federal taxes. In six days, I had my state refund electronically deposited into my checking account. In ten days, I had my federal refund in the bank as well. I suppose that I could have had my refund, minus several hundred dollars, in the form of a loan a few days earlier if I had gone to H&R Block. But you see, I'm not desperate and I'm not a moron.

Side Note: Hopefully, this post will become irrelevant soon. The Feds are considering banning the practice of providing rapid "refunds." And who is leading the charge against banning this fraudulent, predatory practice? Jackson-Hewitt, of course.

1 comment:

  1. The rapid refund is in fact a loan against your anticipated refund, and the charges amount to usury -- they'll take a quarter of your refund as the feee for loaning you the money up front, plus a fee for processing it. And that doesn't include the fee for doing your taxes with them to start with. They might as well be wearing masks and carrying guns. I use Block to do my taxes, but that's all I use them for -- my refunds come from the state and federal governments in a week or so, just like yours.