Avoiding the Pitfalls of Refund Anticipation Loans

Release Date: March 16, 2009
File Size: 105 KB
File Format: pdf


This report, "Avoiding the Pitfalls of Refund Anticipation Loans," finds that in tax year 2006, low-income families lost $3.1 billion of their Earned Income Tax Credit (EITC) benefits to high-interest, short-term loans, tax preparation fees and other financial products issued by commercial tax preparers.

The EITC is a refundable federal tax credit for low- and modest-income workers and is one of the most effective tools for lifting families out of poverty. According to CDF's analysis of Internal Revenue Service (IRS) data, in tax year 2006, more than 22 million taxpayers received the EITC, with an average benefit amount of $1,950. According to the Center on Budget and Policy Priorities, the most recent estimates show that the EITC lifted 4.4 million low-income Americans out of poverty—including 2.4 million children.

The report asks and provides examples of ways that individuals, communities and policy makers to step up and take action to lift children out of poverty by helping their working families keep more of the benefits they've earned.

In Your State

CDF has issued individual reports for the following states. Find out the breakdown of dollars lost to predatory lending by city and county.

Additional Resources

To find out if you are eligible for the EITC, please visit the IRS's website.

Free tax preparation is available through the Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) sites in many communities. To find a VITA site near you, check your community newspapers or call 1-800-906-9887 for more information. To find a TCE site near you, please call AARP—the largest TCE participant—at 1-888-227-7669.