BUFFALO, NY -- The tax deadline is just ten days away, and one accounting firm is sharing the number one thing you can do to get your tax refund back faster while avoiding high interest refund anticipation loans.
Those refund anticipation loans are not widely used anymore, and the government calls them one of the five loans you should avoid. Offered by some tax preparers, they can also go by the names "instant" or "24 hour" refunds, but they are not refunds, they are loans that carry high interest rates and can damage your credit.
The federal government cracked down on this type of high interest loan coming from banks, but some tax preparation places still offer something like them called Refund Anticipation Checks. Interest rates can be as high as 300-percent or more.
Friday, we talked with a tax partner at Gaines Kriner Elliot, a large accounting firm. Richard Wojciechowski says the best way to file right now, or if you are waiting until the last minute, is to do so electronically. He says you will probably get your refund back in three weeks and will also avoid getting ripped off by a high interest loan.
"We've never done them. I've never looked into them. Quite frankly, I neither have the time nor the inclination. They are very expensive. I would highly recommend for our three week wait. It's the processing fee is really what you're paying. It equates to a very high rate of interest that's usually not worth it. Wait for three weeks and be happy when you get your refund," says Wojciechowski.
A lot of people who think they are going to owe the IRS might think it is better to wait until the last minute to go to a tax preparer, but you can file your return early and wait until April 15 to send your check in.
Refund anticipation checks that you get from tax preparation places must be repaid even if you don't get your refund, or it is smaller than you expected. And, remember you are paying all of that interest, so a lot of accountants say to avoid them all together.
This is the first year in 38 years that the firm we visited Friday will not file all of its clients' returns on time. They are filing extensions for some clients, but have already paid the IRS. This has to do with Congress not agreeing on several tax rules until the last minute. The IRS needed more time to update its computers and forms, and as a result, it started processing returns about ten days later than usual. It just put everyone behind.