Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, January 27, 1992 TAG: 9201270121
SECTION: VIRGINIA PAGE: A-3 EDITION: METRO
SOURCE: DAVID M. POOLE STAFF WRITER
DATELINE: LENGTH: Medium
PATIENCE PAYS ON TAX REFUNDS, BUT SOME CAN'T WAIT
W-2's are out, and thousands of Southwest Virginia taxpayers are rushing to claim refunds from the Internal Revenue Service.But consumer advocates say a little patience may pay off in the long run.
Taxpayers who want a refund in a few days - instead of several weeks - pay a price that can run as much as $124.
"It's a shame because they'd just have to wait a few more days, and they would get their refunds at no extra cost," said Susan Andrews, electronic filing coordinator with the IRS office in Richmond.
Consumer advocates fear that tough economic times will force more taxpayers to turn in desperation to companies advertising virtually instant access to refund checks.
"There's going to be a lot of people out there who need their money right away," said Fran Stephanz, director of the Better Business Bureau in Roanoke.
"These are the people who can afford it the least."
Income tax refunds have become a type of savings account for many wage earners. The federal government withholds a few extra dollars from each paycheck and then refunds the money at the start of each year.
Taxpayers who mail their tax returns to the IRS can expect to wait six to eight weeks for their refund check to arrive.
Computer advances have sped up the process. For about $25, taxpayers can transmit their returns electronically and receive their refund check in 2-3 weeks.
Still, some people can't wait that long.
"I wanted it because it's mine," said a single mother who picked up her "rapid refund" check Friday at the H&R Block office at Towne Square.
The woman, who did not want to give her name, said it was worth paying a $64 in fees to get her check in three days.
"As a single parent, there's things you know you need and if you know the money's there, you want to get it right away."
Fast refunds work like this: Taxpayers sign their refunds over to a private company, which gives them a check for the same amount - minus fees - within three or four days.
The fees for these so-called Refund Anticipation Loans range from $60 to $124 in the Roanoke Valley, according to a phone survey.
The prices include an electronic transmission fee and a set loan processing fee. A company must charge the same fee for each refund anticipation loan and cannot base the fee on a percentage of the refund.
Stephanz, of the BBB, said the best bet would be to mail tax returns early to beat the last-minute rush of filers.
She advised wage earners to stop and consider the cost of electronic filing and refund anticipation loans.
The loans may seem like a good deal because taxpayers do not have to pay any out-of-pocket fees. But wage earners should remember that the loan fees will cut into their refund.
For instance, a wage-earner with a $1,500 refund easily could pay $75 - or 5 percent of the total refund - to file electronically and pay loan fees.
Andrews, of the IRS, said the loan fees can be "astronomical" for people with relatively small refunds.
"It just blows your mind," she said. "It just depends on the desperation of the taxpayers - and we know it's out there."
Ted Vaughan, manager of Prime Time rentals on Williamson Road, understands economic desperation.
"The way the economy is, people are hurting out there," he said. "People don't want to wait. They want to do it right away."
Prime Time, a rent-to-own franchise, has jumped into the refund anticipation loan business this year and is running TV commercials for their "Fast Tax" service.
The company's slogan is: "Tax returns so fast, you won't know what hit you."
Vaughan said the Prime Time loans were a good deal, even though its fees were among the highest in the area.
"I think it's a good deal for anyone who is desperate, who needs cash right away," he said.
***CORRECTION***
Published correction ran on January 30, 1992\ CLARIFICATION
The fee for tax refund loans offered by Prime Time rentals was listed incorrectly in a story and chart published in Monday's paper. A $89.95 fee covers both electronic filing and a refund anticipation loan. Taxpayers who simply want to file electronically are charged $19.95.
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Memo: correction