By Mark Huffman
ConsumerAffairs.com
March 8, 2010
For years consumers made the annual trek to a franchise tax preparation service mainly for one reason. They were in a hurry for their refund and wanted a Refund Anticipation Loan provided by the tax preparer.
But RAL's are expensive and several states have taken action against companies that provided them.
In 2006, California sued H&R Block and Jackson Hewitt, alleging they violated 15 state and federal laws in marketing and providing high-cost RALs, mainly to low-income families.
With heat from regulators and an increasingly tough credit market, many tax services have discontinued these instant loans, which often comes as a rude shock to the consumers who had been using them all these years.
Amy, a consumer from Pueblo, Colo., usually relied on Jackson Hewitt to do her taxes because she wanted the RAL, even though it cost a lot to have her taxes prepared and pay for the loan.
"I read all the complaints that were posted and told my husband we should try to file ourselves, since banks are not doing the RAL loans," Amy told ConsumerAffairs.com.
Amy said she read about the Internal Revenue Service's online e-file service, and even though she had never done her own taxes, thought she would at least check it out.
'Why have I never used this before?'
"I went to irs.gov and noticed that companies are promoting a free online tax return if you make under $57,000 for the year," she said. "I picked TurboTax Freedom Edition. It was so easy. Why have I never used this before instead paying all the high fees from Jackson Hewitt?"
Because her family earned less than $57,000 she was able to file her federal tax return at no charge. The cost of filing her state tax return online was only $14.95.
"To top this off, we got back more then we thought," Amy said. "Plus, Jackson Hewitt and H&R block have been telling people since they did not qualify for the RAL they should get a check in 8 to 17 days or something. Turbo Tax has an option for direct deposit and you will get your tax return deposited in a week! We did this and received our money in about four days."
Consumer advocates have been repeatedly urging consumers like Amy to forego RAL's and instead take advantage of the free IRS service. Indications are, more people are in fact beginning to get the message. But why has it taken so long? Amy says there's a confidence factor that's hard for some people to overcome.
"I thought I couldn't do this because I'm bad with math and stuff, but Turbo Tax walks you through each step, very easy directions to follow, plus I had my kids bugging me when I was filing our taxes and still was still able to do it," she said.
Amy thanked ConsumerAffairs.com for bringing this information to her attention, and to all the consumers who have posted comments about high priced RALs.
"Thank you for posting your comments," she said. "If you didn't I would have never looked under other options to do my taxes. For people who are wanting RAL loans or to do their taxes with them, please think again."
