RALEIGH, N.C. - The tax man cometh, and while most fear him, he’ll be bringing refunds to some lucky tax payers–and they’re going to be looking to do something with that “windfall.”
“SECU has found many of its members unnecessarily pay for income tax preparation, and obtain refund anticipation loans with high interest rates targeted at low income taxpayers,” said Josh Kelly, vice president of financial advisory services for State Employees CU here.
These refund anticipation loans make little sense, since the IRS typically delivers refunds in seven to 13 days, Kelly noted, adding “Tax filing abuse is becoming a nationwide epidemic.”
The key is to try to reach out to members who may be getting a tax refund before they go for a tax refund anticipation loan to help them determine what might be the best use of these funds.
“We sometimes talk to them about ‘When you get this refund, what are you going to do with it?’” said Ramona Dow, vice president or marketing and strategic initiatives for the Northeast CU.
Options discussed are Individual Development Accounts at the credit union, savings for education and IRA accounts.
Engaging in this conversation helps turn the people-helping-activity of being a Voluntary Income Tax Assistance (VITA) site into a potential growth activity for the credit union, as well (see related story).
Though growing membership isn’t the primary reason credit unions cite for being a VITA site, it is one of the added benefits for CUs.
The Wisconsin CU League’s Jim Drogue said credit unions in his state do make a point of explaining the ease–and the advantage–of becoming a credit union member. With just a small deposit, a potential new member at a VITA site can file his income tax returns and open a basic deposit account that can then be used to receive tax refunds at no cost via direct deposit, avoiding tax preparation fees and the rapid refund charges that are typical of RALs. Moreover, this allows them to receive their refunds in nearly as little time as if they had used an RAL–about a week.
