| The economy has hit a lot of people hard and left so many struggling to find enough money to cover their bills. Because of this, people all across America are waiting anxiously for their tax returns to give them just a little money to help things out. Taxes and Borrowing Money do not really go hand in hand, but if you need money now you can get a loan on your tax return to help pay off those pesky debts.
Sounds like a good deal right? Getting your tax return a little early to help out. Tons of people do it because they really need the money, but is it the right choice? While you may be desperate to get some money coming in, is borrowing from your tax return the best option? There are three main reasons why you should not borrow from your tax return and instead look for alternatives.
1: Lots of fees. When you look towards your tax refund for money, you should expect to pay a ton of fees. There are fees for just about every aspect of the loan, from the initial loan fee to a prep fee to even an electronic filing fee. If you are looking to get a couple grand out of this, when all is said and done with the fees you may only actually be getting a couple hundred.
2: Massive APR. When looking towards Taxes and Borrowing Money from your return you will have to deal with an annual percentage rate increase of anywhere from 200% to 2000%. If you are struggling for money as is, can you really afford to be shelling out all this extra cash? Odds are you are not in a position to pay that much, yet even though that may be the case, many people still do it.
3: IRS is able to withhold your refund. You are putting a lot of trust in the IRS and it is very possible that your trust can be betrayed. If the IRS has any problem whatsoever with your tax return they can hold onto your refund forcing you to be unable to pay back your loan for months. All the while you are still responsible to pay the high interest rates.
People often overpay on their taxes so that they can get a nice big lump sum at the end. They think of it as a nice reward, letting good old uncle sam hold onto their money for them. But when it comes down to the wire and you need money now, delving into your Taxes and Borrowing Money from your return may be the only option you have left. And then you are stuck with a ton of fees.
Instead of taking that route, think about saving that money next year. Instead of overpaying on your taxes for a nice return, invest that money somewhere. When the government holds onto your money it is not generating interest. If you invest wisely you can actually get more money than you put in. That can go a long way to alleviating your financial problems. |