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Wis. CUs encourage direct deposit free filing
PEWAUKEE, Wis. (2/4/10)--Wisconsin credit unions are encouraging direct deposit and free-filing options this tax season to steer consumers from costly “refund anticipation loans,” (RALS). RALS drain millions from state refunds--particularly the refunds of people with low and moderate-incomes, said the Wisconsin Credit Union League. Short-term, high-interest loans, RALS, are heavily marketed by paid tax preparation firms during tax time and can deplete hundreds of dollars from a typical refund. These loans cost Wisconsin tax filers $22.4 million in 2006--the most recent year for data--in exchange for the promise of a fast refund. Alternatively, when paired with state and federal electronic filing options, direct deposit can deliver tax refunds within days and at no cost. “People use products like RALs for the promise of quick cash, but are essentially paying to borrow their own money,” said Brett Thompson, league president/CEO. “But by using an existing savings account or opening one, anyone in Wisconsin can use direct deposit to get a speedy tax refund without hurting their wallet, and just as quickly as if they had used a RAL by using free electronic filing options.” Data also show that RAL usage increases considerably among Wisconsin taxpayers eligible for the Earned Income Tax Credit (EITC)--a tax credit for low to moderate-income filers. Eighteen percent of EITC filers in the state use RALs to receive their refunds, compared with 3% of all state tax filers. EITC-qualifying tax filers using RALs lost $14.4 million in 2006. Thompson noted that free help is available through volunteer tax preparation sites in Wisconsin to persons of low and moderate-income and others who qualify. Credit unions are assisting in the operation of these sites, which are coordinated with the Internal Revenue Service, Department of Revenue and AARP. In addition to free tax preparation, the sites promote tax education and asset-building strategies. Credit unions’ tax assistance efforts are part of their ongoing REAL Solutions initiative, which strives to help families improve their financial position by encouraging saving and investing, improved creditworthiness and long-term wealth building, the league said. The Wisconsin league said it is encouraging all credit unions to tell their members about free filing options by linking to www.freetaxrefund.org. Use the link for more information.
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