Each year, taxpayers from all walks of life find themselves wading through tons of information regarding filling returns, paying taxes, anticipating refunds and more. While filing your taxes is certainly not the hassle it once was, thanks to the opportunity to e-file online, it is still important to be aware of all of your options. This is especially true of the tax refund process; or more specifically, how you choose to receive your refund. Some consumers don't mind waiting six weeks or more for a paper check to arrive in the mail. However, others want access to their money immediately. This is where the decision between RAL, short for Refund Anticipation Loan, and direct deposit comes into the play.
An RAL is a common way in which many taxpayers choose to receive their refund. While this is a more immediate option, it is important to note that this is a high-interest rate loan made against an expected refund amount. Most people choose the RAL option when they need their refund money for immediate purposes. However, the tax preparation offices that often help to originate these loans charge a fee in addition to the interest and/or finance charges accrued by the banks that actually make the loan to the customer. Critics of this process not only point to exuberant APRs (annual percentage rate) on these types of loans (in fact, the APR on credit card advances is lower than it is on most RALs), but also to the fact that they target low-income taxpayers, who often utilize their refunds for a pressing financial need.
Additionally, RALs are not only controversial because of the fees paid by the taxpayers, but also because of the risk taken by the bank. Tax returns can take up to 60 days to be fully processed through the Internal Revenue Service. Oftentimes, the amount of the return is calculated utilizing the information provided by the taxpayer and in some instances, this information can be false. Therefore, by giving the taxpayer access to this money before the return is processed means that banks can sometimes take a gamble on an RAL --- and lose.
However, with the advent of an easier-to-use e-filing process, direct deposit has become much more feasible option among consumers. Direct deposit allows taxpayers to have their refunds deposited directly in their bank account, usually within 14 days of filing. Since this is not a loan or advance of any sort, there are no fees or extra charges associated with this option (other than those that may be charged by your bank for ACH deposits). This is not only a fast method of receiving your refund, but also a safer way to get what is often a large lump-sum of money.
It is important when filling your return that you double check your account information before submitting it for a direct deposit. Your routing and account numbers should be accurate to ensure that there are no delays in receiving your money.
Mark Forbes is an analyst at efile.com, an innovative and easy to use website for Online Tax Preparation. Efile.com has up to date tax news, articles & more. Click to find out more information about Tax Refund Anticipation Loan and the benefits of using IRS Direct Deposit.
Article Source: http://EzineArticles.com/?expert=Mark_Forbes
