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Wisconsin tax-filer program offers predator alternatives
PEWAUKEE, Wis. (2/6/08)--Wisconsin credit unions are offering help to low-income tax filers to stave off predatory financial practices that hurt filers in the past. Credit unions are assisting the filers by opening accounts into which free refunds can be deposited, providing a no-cost alternative to refund anticipation loans (RALs) that cost taxpayers $23.4 million, said the Wisconsin Credit Union League. Many low-income filers who need RALs to pay bills often turn to tax preparers who charge high interest rates. More than 93,731 Wisconsin taxpayers paid an average of $250 in RAL-related costs in 2005, according to the Wisconsin Council on Children and Families. “They paid dearly to borrow their own money,” said Brett Thompson, league president/CEO. “There’s a better option through credit unions that’s free and just as fast.” RALs siphon the tax benefit these filers should receive by claiming the Earned Income Tax Credit (EITC). About $14.3 million of EITC was lost in 2005 in Wisconsin to RALs. The RAL fees by federal EITC recipients in 2005 also denied the state as much as $47 million in economic activity, the league said. Credit unions will open the accounts at volunteer return preparation sites around the state. The sites offer free tax preparation, tax education and asset-building strategies to people with low incomes, the disabled, the elderly and those with limited English proficiency. The sites are operated in partnership with the league, the Internal Revenue Service, the Wisconsin Department of Revenue and the American Association of Retired Persons. Wisconsin credit unions also offer low-cost alternatives to low-income people through REAL Solutions, including payday loan services, check cashing and wire transfers. REAL Solutions’ goal is to meet consumers’ needs for transaction services, while moving them through the steps of opening basic deposit accounts, building creditworthiness with small loans and building wealth over time, Thompson said.
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