1/18/2005
Media Contact:
Jo Lynn Garing, [317] 327-3690
Patricia Milner, [317] 625-4409 |
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Low Income Taxpayers Can Avoid the High Cost of Quick Tax Money
File Jan 14th or Later at a FREE Site - No Tax Preparation or E-Filing Fees INDIANAPOLIS - Tax preparation and e-filing fees and "Instant Refund" loans rob thousands of dollars from Marion County's working poor, but at Indianapolis Asset Building Campaign tax preparations sites, low income families can have the returns prepared and electronically filed for free and receive as much as a $4,300 refund through the Earned Income Tax Credit (EITC) program, if they qualify. Refunds do not come instantly, but can be received within10 working days without any service fees.
"We want families to not only receive all the money they earn, but learn how to manage their money," Mayor Peterson said. "At an Indianapolis Asset Building Campaign site, Indianapolis families will receive all of their refund and financial literacy education."
Three sites open this Saturday and by February 1, 13 sites will be open. Some sites will have extended services and information, such as bank employees to help families open checking and savings accounts. Location operations and times will vary. Recruiting and training of volunteers, materials, equipment, and dissemination of information is being funded and organized by the Indianapolis Asset Building Campaign, a coalition organized by the City of Indianapolis, Internal Revenue Service, Annie E. Casey Foundation and the John H. Boner Community Center. For a full list of partners visit www.indyfamilies.org.
A 2003 report published by the Consumer Federation of America and the National Consumer Law Center, Inc., stated:
"Quick tax loans cost consumers about $907 million, up almost $100 million from the year before," Jean Ann Fox, director of consumer protection for CFA, stated. "When you add in the $484 million in electronic filing fees and $400 million in other charges, consumers are paying almost $2 billion just to get their own money faster than the IRS sends it."
The Annual Percentage Rates (APR) for RALs can range from 97.4% to over 2000%, according to the Consumer Federation of America and the National Consumer Law Center. The loans are repaid when the consumer's refund is deposited in a temporary bank account set up by the lender. The Brookings Institution reports that in tax year 2000 over 340,000 Indianapolis taxpayers claimed more than $92 million in EITC, with 56.5% using a refund anticipation loan to get their refund. Tax preparation services and refund loans can consume a nontrivial portion of an EITC recipient's refund. The purchase of a RAL for an anticipated $1,500 refund costs roughly $90. For EITC recipients filing electronically and choosing to take out a RAL, total fees would consume an average of 13 percent of the EITC or nearly 8 percent of the total refund from the EITC and other credits-totaling $1.75 billion in fees for low-income households.
The Earned Income Tax Credit is a federal tax break designed to help people who work but have low incomes. A worker who earned less than $35,458 last year and has two or more children probably qualifies. Thousands of elderly, part-time and self-employed workers, including farmers, may also qualify. Refunds can total up to $4,300 per family, based on earnings and family situation. Eligible people can "back file" for the EITC for as many as three years.
Taxpayers can get more information or locate a free tax preparation site by calling the HELPLINE at 926-HELP (4357) or by dialing 211.
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