2005-03-18 / Columnists

Notes On Consumer Affairs

By Assemblywoman Audrey Pheffer

Audrey PhefferAudrey Pheffer With tax season upon us, millions of Americans are anticipating refund checks. For some, inundated with outstanding bills and day-to-day expenses, waiting an average of six weeks for a refund check seems too long.

People are increasingly relying on short-term cash advances, or refund anticipation loans (RALs), which provide taxpayers their returns – or at least a portion of them – instantly.

With extraordinarily high annual percentage rates, processing fees, and heavy service deductions, many of these refund anticipation loans take a significant bite out of the refunds due to working families.

I support legislation that will protect taxpayers and ensure that they are aware of all the terms and conditions associated with these loans (A.1366).

This legislation will mirror regulations currently in place in New York City that requires the full disclosure of the terms for tax preparers who offer refund anticipation loans, and a warning that the full amount of the refund anticipation loan will have to be repaid if the refund is not the anticipated amount.

Preparers would be subject to penalties for failure to disclose information about the loans.

People should be aware this tax season that if they travel beyond the city, these requirements for disclosure are not yet in place.

Tax preparation agencies often have a financial interest in making refund anticipation loans. Because it is a seemingly “instant” way for many taxpayers to receive their refund checks in advance, they often overlook the extent to which refund anticipation loans and finance charges erode the full refunds they are due. My legislation will ensure that tax preparers offering refund anticipation loans clearly explain all the terms and conditions of these loans, and that applicants are made fully aware of the financial costs of these “instant” refunds.

Those looking for a quick return should consider that the pace of processing New York state tax refunds has increased in recent years.

By changing computer systems and improving certain policies regarding refunds, the state’s ability to process funds is much quicker.

What used to take two months now takes about five days.

For this tax season, I urge filers to be patient – they will be rewarded in the form of a bigger check. It’s worth noting that if you choose to file electronically, or e-file, you can receive your refund in half the time and without interest rates or additional fees. For more information on electronic filing visit the Internal Revenues Service Web site at www.irs.gov or the State Department of Taxation and Finance at www.tax.state.ny.us.

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