United Way of Greater Knoxville

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news & events

01.28.08
INSTANT "REFUNDS" MEAN TAKING OUT A LOAN ON YOUR OWN MONEY

Rapid refund and quick cash loan offers seem to pop up all over town during tax season. These offers are really just refund anticipation loans (RALs), which are short-term, high-interest loans that taxpayers take out based on their expected returns in order to get their money sooner. With a focus on financial stability, United Way of Greater Knoxville is working to educate the community on RALs and available free tax preparation sites.

Many people are unsure of how to file taxes properly, especially when there are additional forms such as the Schedule EIC (Earned Income Credit), and end up forfeiting part of their refunds by using these services. The average family in Tennessee with an EITC refund of $1,785 will pay an estimated $100 to get a RAL, which translates to an interest rate of 216 percent. RALs are actively targeted at lower-income taxpayers who need their money as soon as possible. These people often do not have the available funds to pay a preparer up front and so suffer from these high interest rates. If there is any delay in the IRS's payment of the refund, the interest on the loan continues to accrue.

There are over 12 free tax preparation sites in the Knoxville area that cater specifically to low-income and senior taxpayers. The IRS-trained volunteers at these sites can file returns electronically and help taxpayers file for credits such as the EITC and the Child Tax Credit. Electronically filed taxes can pay out a return in as little as 10 days and all for free!

Information about dates, times, and locations of free tax preparation sites is available by calling 2-1-1 East Tennessee Information & Referral, a United Way community partner. Taxpayers can also call the IRS at (800) 849-1040 or AARP at (888) 227-7669 to locate a convenient site.

EITC is a valuable resource for low-income individuals and families which is often used to pay rent, utility, or other bills or to open a bank account. For some families, this refund can amount to a 40 percent boost in available income; however, according to the IRS, up to 25 percent of eligible Knox County residents fail to claim this tax credit. Because the money received from the EITC can offer a unique wealth-building opportunity for low-income residents of Knox County, United Way believes it is one of the most effective ways to help people achieve self-sufficiency.

United Way of Greater Knoxville is a local, independent organization dedicated to building a stronger community by helping people become self-sufficient. In partnership with nonprofit agencies, local business, community leaders and ordinary citizens, United Way tackles critical issues like health, education and financial stability. By working together, we provide a network of services addressing Knoxville's most basic needs while working toward lasting change.

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