Taxes                                                                   

With tax season gearing up, State Treasurer Richard Moore cautions North Carolinians to read the fine print on loans offered by tax preparers and reminds them of free tax preparation services available at VITA sites.  Ads for refund anticipation loans, or RALs, are already running in North Carolina.  Tax preparers market these short-term loans to customers as a quick way to get their federal refunds up front.  However, RALs carry high fees and annualized interest rates as high as 500 percent. 

Treasurer Moore has led a national effort to reform these high-interest, short-term tax loans and to increase consumer awareness of their pitfalls.  As a shareholder, Moore called on tax preparer H&R Block, the largest provider of RALs, to reform the loans they market.  H&R Block has since announced changes to their products and improved interest rates.  As chairman of the state’s Banking Commission, Moore initiated an investigation of these loans’ effects in North Carolina, and he has encouraged North Carolinians to utilize free tax preparation services offered at VITA sites across the state.

Approximately half a million North Carolina taxpayers obtain tax refund loans each year.  Based on an estimated average charge of $100 per loan, this amounts to $44.3 million in refunds drained from families’ pockets each year.  Over the past six years, the number of tax refund loan facilitators registered with the N.C. Commissioner of Banks has increased by 52 percent. 

Tax refund loans prey on those who can least afford it.  In North Carolina, 86 percent of RAL applications were from low-income borrowers, and 65 percent were made by borrowers who received the earned income tax credit, the largest federal expenditure to benefit working families with children.  African-American and Latino tax filers are over-represented in the tax refund loan population. 

Other Resources

Free Tax Preparation Sites in North Carolina

AARP’s Tax-Aide Sites

IRS Information on Free Tax Preparation Assistance

EITC Carolinas

The National Community Tax Coalition

North Carolina’s Report on Refund Anticipation Loans

Community Reinvestment Association of North Carolina’s Report on Refund Anticipation Loans

The National Consumer Law Center’s latest report on RALs