By PROF. ANTHONY RIVIECCIO, MBA PFA
Twenty five years ago, we woke up to the phrase rapid refund!
And many of the big income tax preparations companies advertised this misleading phrase–and the people ran there–to find out it was not a refund but a loan instead. New York State lawmakers declared in 2002 that so long as customers were made fully aware of what it is and sign disclosures then it was perfectly legal.
And now in 2019, the tax loan/refund process has gone in full gear. You would think you’re doing your taxes with the big tax preparation companies, but sometimes I wonder if those customers are doing their taxes with Al Capone. After all, rumor was, he was loansharking at 25 percent in the 1940s. In 2020, based on inflation, that would now be 140 percent.
Today, you can walk into a tax preparation office and get an immediate $1000 loan, until Feb. 15, 2020. During that time, you get a big line of credit, and you even get an ATM card to hold the line of credit. And, of course, don’t worry about paying it back; just do your taxes with the tax company and they’ll just take your loan, right from the top. A simple three-month loan.
So walk in today, fill out an application (you can even do it online), and if approved, you can pick up your line of credit on your $45 card. Yes, the charge is $45.
And the loan, spend it fast! You have till Feb. 15, 2020 to spend at a 36 percent annual interest rate.
And make sure when you get your monthly bill, you pay it within five days, or pay a $7.50 charge.
So if one borrowed a $1,000 today, while anticipating a $2,000 tax refund in April of 2020, get ready to pay:
$45 ATM card charge
$130 interest charges
We’ll be nice. Let’s say they pay on time. So one will be paying minimally, $175 or 18 percent or four months. Current personal loan rates in banks today are hovering at 4 to 5 percent annually. Al Capone would have been proud.
We will not mention any one particular tax company because three decades later, it’s not just the big companies where you can get your tax refund/loan, you can also get it from Joe Blow Tax Preparation Firm at your corner neighborhood store.
Get ready for the football television advertisements, you’ll see them soon. It will be interesting to see if the TV stations will show a gangster movie before or after.
Or sometimes I wonder if we should lock up the customers for making such foolish decisions. Your taxes mean a lot. Not just the preparation but the planning before and after as well, even more so now that the tax laws have radically changed since 2017.
So here goes the cherry on the cake: if, for example (it’s called tax planning folks), one filer who has middle class income did not readjust their W-4 in 2019, via the 2018 tax readjustment, then if your tax refund went down last year (and most did) it’s going to go down even further in April of 2020. So, you’ll have less of a refund to pay a three-month loan at 18 percent.
Maybe I’m in the wrong business? Where’s my Jimmy Cagney hat?
Seeing a tax professional is not good enough. Use common sense folks! You can get your refund, for free three weeks after you file, via free e-filing. And if you really need a loan prior, then attempt to spend to other credit vendors at financial institutions where you can pay a reasonable fee and, we’re sure, a much LOWER rate of interest.
Professor Anthony Rivieccio, MBA PFA, is the founder and CEO of The Financial Advisors Group, celebrating its 24th year as a fee-only financial planning firm specializing in solving one’s financial problems. Mr. Rivieccio, a recognized financial expert since 1986, has been featured by many national and local media including: Kiplinger’s Personal Finance, The New York Post, News 12 The Bronx, Bloomberg News Radio, BronxNet Television, the Norwood News, The West Side Manhattan Gazette, Labor Press Magazine, Financial Planning Magazine, WINS 1010 Radio, The Co-Op City News, The Bronx News, thisisthebronX.info and The Bronx Chronicle. Mr . Rivieccio also pens a financial article called “Money Talk”. Anthony is also currently an Adjunct Professor of Business, Finance & Accounting for both, City University of New York & Monroe College, a Private University. Financial Focus Interactive is now an app and a place where one can: Read, Listen, Watch Talk & Learn about Financial Solutions with like minded people and a live financial advisor. Financial Focus Interactive app can be found on the Google Play Playstore or on or internet app at: https://www.financialfocus.app For financial assistance, Anthony can be reached at (347) 575-5045.
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