The economy has hit many people hard and left many struggling to find enough money to cover their bills. Because of this, people all across America are waiting anxiously for their tax returns to give them just a little money to help things out. Taxes and Borrowing Money do not go hand in hand, but if you need cash now, you can get a loan on your tax return to help pay off those annoying debts.
It sounds like a good deal, right? Get your tax return a little early to help out. Tons of people do it because they need the money, but is it the right choice? While you may be desperate to get some money coming in, is borrowing from your tax return the best option? There are three main reasons you should not borrow from your tax return and instead look for alternatives.
1: Lots of fees.
When you look towards your tax refund for money, you should expect to pay many fees. There are fees for every aspect of the loan, from the initial loan fee to a prep fee to even an electronic filing fee. If you are looking to get a couple of grand out of this, you may only get a couple hundred after fees.
2: Massive APR.
When looking towards Taxes and Borrowing Money from your return, you will have to deal with an annual percentage rate increase from 200% to 2000%. If you are struggling for money as is, can you afford to be giving away all this extra cash? Odds are you are not in a position to pay that much, yet even though that may be the case, many people still do it.
3: IRS is able to withhold your refund.
You are putting a lot of trust in the IRS, and it is possible that your trust can be betrayed. If the IRS has any problem whatsoever with your tax return, they can hold onto your refund, forcing you to be unable to pay back your loan for months. All the while, you are still responsible for paying the high-interest rates.
People often overpay on their taxes to get a nice big lump sum at the end. They think of it as a nice reward, letting good old Uncle Sam hold onto their money. But when it comes down to the wire and you need cash now, delving into your Taxes and Borrowing Money from your return may be the only option you have left. And then you are stuck with a ton of fees.
Instead of taking that route, think about saving that money next year. Instead of overpaying on your taxes for a nice return, invest that money somewhere. When the government holds onto your money, it is not generating interest. If you invest wisely, you can get more money than you put in. That can go a long way to alleviating your financial problems.
Check out this link for more of my Resources: https://linktr.ee/willitacherie