Report: Tax Refund Loans Cost Low-Income Arkansans $100 Million a Year

Arkansas News Bureau
November 2, 2009
Lyon, John

Findings by Arkansas Advocates for Children and Families show that state residents fork out an estimated $100 million annually for refund anticipation loans -- nearly $22 million of that in loan fees and the other $78 million in tax preparation costs, according to 2006 data. "Low-income tax filers are paying tax preparation fees, in many cases exorbitant tax preparation fees to have their taxes done" even though most needy households qualify for free help through a Volunteer Income Tax Assistance (VITA) site, says Arkansas Advocates executive director Rich Huddleston. The report additionally finds that Arkansas residents are losing out on between $85 million and $110 million a year by failing to claim the federal earned income tax credit. The IRS figures that as much as a quarter of eligible Arkansans are not claiming it; meanwhile, the report estimated that those who did spent roughly $35 million in 2006 on tax preparation fees. "As a result, millions of our tax dollars ultimately serve as an 'economic stimulus' for for-profit tax preparation companies rather than a safety net for low-income [people] they were intended to help," explains Ginny Blankenship, Arkansas Advocates' director of research and fiscal policy, who penned the report.