By Irene Dominguez (ACCION USA Consultant) 

When the time comes to file your taxes, do not assume that tax preparation companies have your best interests in mind. Be especially cautious if the tax preparer offers you a Refund Anticipation Loan (RAL) also known as "instant loans" or "instant refunds"). Rather than providing you with access to quick cash, these loans will cost you money!

How does an "instant tax  refund" work?

The tax preparer will offer you the option to get an "instant refund", so you can receive your refund within hours or in a couple days from the time you file your taxes.

•  If you accept the offer, the preparer will ask you to sign a document, which is really a loan agreement.
• If you sign the agreement, you are authorizing the preparer to use your income tax refund that the IRS (Internal Revenue Service) owes you, as a guarantee on the Refund Anticipation Loan that the preparer is offering you. The interest rates on the RAL can be as high as 50 to 500 percent a year.
• Once the loan is approved, you will get your refund money right away. Because you agreed to pay interest on this loan, you will actually receive 10% less of your refund.

In other words, with a Refund Anticipation Loan, you borrow money at a high cost against your regular tax refund.

How to access your tax refund quickly without losing money

Basically, the best way to get a tax refund quickly without paying high interest is to request a direct deposit. Through a direct deposit, your money will be transferred directly into your bank account.  If you choose to directly deposit your tax refund, it will take as little as ten days to receive your money!

If you file your income taxes on your own, you can ask for a direct deposit on your income tax form.  There is information available about how to request a direct deposit in the IRS booklet and a phone number to call if you have any questions.

If you don't have a bank account, ask your tax preparer if you can directly deposit your refund on to a pre-paid card. Pre-paid cards work like debit cards - they should have a VISA or MasterCard logo. Once your refund is loaded onto the card, you should be able to use the card for purchases anywhere that VISA or MasterCard are accepted. If your tax preparer offers pre-paid cards, make sure to ask about any fees associated with the card before signing up!

Need help preparing your tax forms?

You have two options:

1. Do it yourself! There are many kinds of tax preparation software available for as little as $30. After you purchase the software, you download it on to your computer and it will walk you through your tax forms. Click here for a list of companies offering tax software on the IRS website. If you still need more help, look for online help on the IRS website and it will automatically give you specific advice to prepare your tax forms.
2. Work with a tax preparer. If you had an income of $49,000 or less during the fiscal year, you may qualify for a free service preparation program from VITA. Call 1-800-829-1040 to find a VITA site in your community. Remember that if your income is low, you may also be eligible for a special refund EITC (Earned Income Tax Credit).

If your income was higher than $49,000 during the fiscal year and you don't feel comfortable preparing your tax forms on your own, you will need to hire a tax preparer. Visit the the IRS website (Internal Revenue Service) to review your options. And remember; steer clear of Refund Anticipation Loans!