The Better Business Bureau advises consumers to be wary of these costly loans.
They deliver refunds only slightly faster than the IRS.
loans are similar to payday loans. They're short-term loans with high interest
rates that can range from 50 to 500 percent. In some cases, they have hidden
administrative fees. If the tax preparer makes a mistake in calculating your
refund, borrowers could be required to pay fines and fees also.
"Consumers may assume that the loans will be paid off quickly when their
refund arrives, but if the refund is less than the loan, consumers will have to
repay the difference, plus fees and fines," said Bonnie Bakin, BBB president and
The IRS usually delivers refunds in as few as 10 days after a consumer files
a tax return, if the consumer files the return electronically and takes the
refund by direct deposit to a bank account. The speed makes most refund loans
This year, the IRS has another option for refunds if a consumer doesn't have
a bank account: a prepaid debit card. The cards, available only by invitation,
can be used to get money from ATM machines or to buy goods and services from
retailers. The cards arrive faster than checks, the IRS says, and may allow
consumers to avoid check-cashing fees.
The BBB advises consumers to be wary of two common tax-time schemes:
Tax reduction schemes are
promoted by companies that claim they can help consumers reduce what they
owe the IRS by working on their behalf with the IRS. However, the BBB has
taken complaints from consumers who paid thousands of dollars to such
companies, only to find out that the companies didn't reduce the amount they
owed and, in some cases, had never contacted the IRS.
BBB advice: If you have a debt with the IRS, consult an IRS enrolled
agent, a certified public accountant or a tax attorney to determine whether
you qualify to file for anything other than paying your taxes, fines and
penalties in full.
Phishing emails may say that
there's an issue with taxpayers' refunds, that they are being audited or
that a problem is delaying processing of their taxes. Many include a link to
a website set up by scammers, where victims are asked for Social Security
numbers, bank account or credit card information. Some sites are designed to
automatically install viruses or other malicious software on the victims'
BBB advice: The IRS doesn't email people about their taxes. The
agency typically contacts taxpayers by mail. Tipoffs that an email is
fraudulent may include spelling or grammatical mistakes. The BBB advises
consumers not to open any attachments or click on links in the emails.
[to top of second column]
If you decide to hire a tax preparer, the BBB advises that you:
from friends, but before you hire anyone, check out the preparer
with the BBB at www.bbb.org or
by calling 314-645-3300.
Is the preparer a certified public accountant, a tax lawyer or
an enrolled agent? Will the preparer sign your return and
provide you with a copy? Does the preparer belong to a
professional organization that requires members to adhere to a
code of ethics?
Be wary of
promises. Until the preparer knows your situation, there is
no way to know whether you'll get a refund or how big it will
accessibility. You may need to contact your preparer after
tax season is over. Will he or she be available?
Read the contract.
Know what the service will cost, what it covers and whether the
cost changes if you have a complicated return. Will the preparer
represent you in case of an audit?
Check your return.
Before you sign the return, read it over to check for mistakes.
Ask the preparer to explain anything you don't understand.
[Text from file received from the
Better Business Bureau of
For 100 years, the Better Business
Bureau has been helping consumers find businesses, brands and
charities they can trust. In 2012, consumers turned to BBB more than
100 million times for reviews on more than 4 million companies and
reports on 11,000 charities, all available for free at
www.bbb.org. The Council of Better
Business Bureaus is the umbrella organization for 114 local,
independent BBB's across the United States and Canada, as well as
home to its national programs on dispute resolution and industry