A local tax-preparation service is warning Somalis and others in the St. Cloud area about loans that exchange a same-day tax refund for unusually high fees.

The recession might tempt people to spend sometimes one-third of their refund amounts to tax preparers just to get their refunds faster. But people who want to get their full tax refund should beware of "refund anticipation loans" or "instant refunds," local and national experts say.

AccountAbility Minnesota will next month begin providing tax-filing services for the Somali community, which includes many people who send money to relatives in refugee camps. A recession has hit the Somali community hard as manufacturers in the St. Cloud area have cut back hours or laid off employees. As a result, fewer people are able to send money to their relatives.

"We just have to make our clients aware," said Rod Harren, who works in St. Cloud for AccountAbility.

The nonprofit group helps low-income people file for taxes. "Low-income" is defined as $30,000 annual income or less for individuals, and $45,000 or less for families.

The nonprofit organization also will put up posters in St. Cloud this month to warn taxpayers about the loans. A draft of the poster cautions against taking the loans, which are often billed as "instant refunds," "fast cash" or "express money."

Tax preparers large and small offer these instant checks, said Austin King, national director of ACORN's financial justice center in New Orleans, La. You get your tax check the same day you file it, but you often pay huge fees and interest, he said. Sometimes about one-third of the check goes to the preparer.

"(Refund anticipation loans) are a huge rip-off," he said.

His organization has campaigned against the loans, and because of it, some companies have made progress by lowering interest rates, but many tax preparers still push them.

Often the loans are targeted at people who make little income each year. And because of the recession, local tax preparers say they expect more people to want their money faster, regardless of income level. King said if people are in desperate need of a loan, they should get one from a credit union for $1,000. Chances are, those loans will be offered at a lower interest rate, he said.

Otherwise if people wait seven days after filing their taxes, they can get their full refund check, he said.

Source: sctimes.com