As we embark on this year's tax season, many Illinoisans are looking forward to their tax refund. However, today's economy will leave many hard working families vulnerable to high interest loans.
Many people may consider taking an "advance" on their tax refunds to pay for the presents, vacations or new clothes desired rather than wait a few extra days to get their refunds. Unfortunately these innocent sounding "advances" are really Refund Anticipation Loans (RALs) and often come at a high price with expensive fees, high interest rates and possible future debt.
In recent years, tax preparation companies have begun promoting pay-stub RALs before taxpayers get their W-2s from their employers which can cost borrowers as much as 1/3 of their total refund in interest and fees and, worse yet, can force the borrower into even greater debt by overestimating a family's refund. Taxpayers can get their Illinois tax refund directly deposited in about a week if they file their tax returns electronically. Federal refunds take a few days longer, but they can be processed in about two weeks.
Thanks to legislation Governor Blagojevich signed this year, 100,000 more Illinoisans will be eligible for the Illinois Earned Income Tax Credit (EITC). Lower-income workers who are eligible for the EITC are the most frequent targets for RALs. Nationwide, low-income workers comprised over 60 percent of all RAL borrowers. In Illinois, more than 38 percent of all EITC recipients used refund anticipation loans.
It's your refund. Get it fast. Get it all. We urge you to avoid RALs and instead chose Illinois E-Filing at www.tax.illinois.gov, and file your federal taxes online at www.irs.gov.
Brian Hamer, Director
Illinois Department of Revenue
Dean Martinez, Secretary
Illinois Department of Financial and Professional Regulation
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