They want your tax refund!

The IRS reports that, last year, three out of four tax filers got a refund, averaging about $2,171 per household. The companies that helped you file those returns saw that money ($218 billion all together) and have been working on ways to get some of it for themselves.

Recently we reported on NY AG Eliot Spitzer’s suit against H&R Block for chargng excessive fees on “Express IRA accounts” using refund money. Now the Wall Street Journal reports that some state officials are clamping down on other programs “claiming they saddle low and moderate income families, recent college graduates and others with high fees.”

Tax preparers have certainly been creative about ways to get at this money. You can go to some car dealers and have them do your taxes to make it easy to use the refund as a down payment on a car. You can turn your refund into gift certificates (with extra credit) at selected stores.

Perhaps the most popular program is the one in which you get what is often called “an instant refund.” When the tax prepaper finishes your return and you see how much you will get in your refund, they offer to give you that money immediately.

Of course this is a loan, not a gift, and if you read the fine print on the document you sign, you will see that these loans often have interest rates that would make the Mafia blush.

All of these schemes rely on Americans’ need for instant gratification. The preparers know that they can charge a lot if they satisfy that need.

The best thing for you to do is to be patient, get your refund when it comes in from the IRS and then decide what you want to do with it. You will have more money to work with!

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