There is a tax service offering up to $500.00 you can get against your tax refund. Instead of issuing a check they had a form that they made up at the tax office which is a contract with a mini mart store. You borrow $500 against your taxes but you have to pay back $850.00 to the mini mart store when your taxes comes in. then you take your check to the mini mart to cash and they will take the $500 you borrow and the $350 that they are charging you. I would like to know is this legal.
It depends on the usury laws in your state. It sounds pretty dubious, although only an attorney in your state can give you reliable advice.
Marc Whipple is an attorney, but may or may not be licensed in any particular jurisdiction and may or may not be familiar with any particular law or regulation relevant to the subject matter or related issues. Nothing in this message is meant to constitute professional legal advice or to establish an attorney/client relationship and its content should not be relied upon by third parties. Consult an attorney licensed in your jurisdiction and familiar with the relevant law before making legal decisions.
These Also may be refund anticipation loans which are heavily regulated by the IRS. You could go to IRS.gov and search there.
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Even putting aside the legal issues (which the other responses have raised), is it really worth paying $350 just to get a loan of $500 for at most a few months' time? Perhaps if it's a matter of life and death, but otherwise it seems like a really bad deal just from a pragmatic perspective.
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This is basically a refund anticipation loan, (RAL), similar to the ones many large tax preparation firms used to make in concert with banks. It allows a tax filer to get at least some money immediately instead of waiting for several weeks for the refund check to arrive. Federally regulated banks were driven out of this business a couple of years back after federal regulators found that many of the firms and banks were not complying with the federal lending and disclosure regulations.
Now that banks have stopped, many firms have found ways around this. In the case you cited, this tax preparation firm is using a limited RAL through a non bank lender. This is unfortunately not illegal under Kentucky law but is extremely usurious. You are paying nearly half the loan back for the use of the money for the few weeks that it will take to get your refund check. The best way to save time on getting your refund is to file with a firm that files taxes online, and take the option to have your refund direct deposited in your bank account. In most cases you can get your refund from the IRS in as little as 8-14 days.
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