H&R Block announced that it will not offer “tax refund anticipation” loans to its tax-preparation customers this year due to actions by federal regulators to stop H&R Block’s banking partner from offering the high-interest loans. The inability to offer the tax refund anticipation loans could cost the company about $146 million and they have reported that they have no immediate strategy to replace that income. But that may be good news for taxpayers, especially the poor and those who are living on a fixed income. The tax refund anticipation loan industry is a billion dollar venture but has come under scrutiny by consumer advocates and federal regulators due to high interest and fees.
Taxpayers considering a tax refund anticipation loan for the 2010 tax year should consider the following:
- You may not need the loan. Taxpayers can have their tax refunds direct deposited into their bank account within about eight days after they file their taxes electronically.
- Tax firms such as H&R block have a financial incentive to guide you into these loans. They are high interest and have fees that go directly onto their balance sheet. Consider doing your taxes with a firm which does not lean heavily on these types of loans for their revenue.
- You may not get an accurate estimate of your tax refund amount. If the tax preparation firm overestimates the amount of your tax refund, you could be stuck paying the difference. Avoid being stuck with a tax refund anticipation loan payment after tax season by just avoiding the loan in the first place.