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Report: IL Families Lose More than $118 Million in Tax Refunds

March 31, 2008

Chicago, IL – If you're lucky enough to get an income tax refund, there's no reason to have to share it. A new report from the Children's Defense Fund (CDF) on the Earned Income Tax Credit finds Illinois families are losing out on more than $118 million of their refunds. The money is considered "lost" because it goes to paid tax preparers and so-called "refund anticipation" lenders.

The CDF's Ed Shelleby says that money could stay in the pockets of Illinois families if more people would use IRS-approved free tax preparation assistance that is available to them. He says big chunks of refund money disappear when taxpayers grab the chance for immediate cash in the form of "instant" refunds -- which really are short-term loans, often with triple-digit interest rates.

"Each year, about $3 billion go to these predatory commercial tax preparers, which is money out of the pockets of millions of families across the country."

Shelleby notes the EITC is otherwise one of the nation's most successful anti-poverty policies. The refund bumps more than four million families above the poverty line each year, providing money that is spent, usually quickly, in local businesses.

"Most people use the EITC to buy things like clothing for their children, or to catch up with utility bills, pay for rent or repairs for their car."

However, in Chicago alone, $40 million dollars of EITC money doesn't make it to families. The tax refund anticipation lenders insist they disclose the terms of their "instant" refund programs, and that the quick access to the cash helps families who need the money fast. But these loans are unnecessary, says Shelleby, when truly free tax preparation assistance is available from the Illinois Department of Revenue. Find it online, at www.revenue.state.il.us.

The CDF report is also available online, at www.childrensdefense.org.

Deborah Smith/Don Mathisen, Public News Service - IL