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WASHINGTON — Instant tax refunds could end up taking hundreds of dollars out of troops’ pockets, and they might not even know it.

With tax season looming, financial experts are warning troops that some tax preparation deals, especially those that promise same-day refunds, could be costing them a large portion of any tax refund.

“Our sense is that junior enlisted troops are the most vulnerable, and they’d be better off if they were just a little more patient in getting that money,” said Fred Becker, CEO of the National Federal Credit Union Association. “Almost every other option available to them is a better deal.”

Becker said many consumers don’t realize that “instant” refunds advertised by banks and tax preparation specialists are often short-term loans based on the anticipated refund.

The institution issues a loan for part of the expected refund total, then keeps the full refund amount when it arrives a few weeks later. For a typical $2,000 refund, Becker said, the customer ends up paying about $200 in various fees associated with the loan.

Unless that money is needed right away, Becker said, troops are usually better off waiting a few weeks and keeping that $200.

“They don’t realize what this is costing them,” he said. “And if their return comes back lower than expected, it could cost even more.”

Capt. Keith Bracey, a tax assistance officer at Walter Reed Army Medical Center, said he has heard horror stories of troops who forgot a spouse’s W-2 when they went to the tax preparer, then owed hundreds more on the loan when their refund was reduced.

“Most people assume they’re just getting their money quicker for free,” he said.

The loans aren’t the only unnecessary cost, according to Becker. Servicemembers often can save on tax preparation fees, since free options are available to the military.

Pentagon spokeswoman Lt. Col. Ellen Krenke said all of the military services run tax centers that provide free tax preparation services to military members, retirees and family members.

Federal rules give troops living overseas until June 15 to file their tax returns. Servicemembers in a combat zone have until 180 days after their return from their deployment to complete their tax forms.

But Capt. Mary Schaefer, of the Joint Armed Forces Kuwait Tax Center, said most troops in combat zones want to finish their taxes sooner than that because they’re entitled to a refund.

Under federal law, little of the pay and bonuses they receive while serving in a combat zone counts against their taxable income.

The tax center trains and provides tax preparation specialists to help servicemembers decipher the forms to be filed.

Troops in the Middle East can call DSN 318-430-2111 to find out where volunteers are available and what other services they can use to file their returns.

Ways to get your refund more quickly

¶ File electronically: Families who earned less than $50,000 last year can file online for free, and speed up their IRS processing time by several weeks.

¶ Sign up for direct deposit: Linking your return to a bank account can cut up to a month off the time it takes a check to arrive in the mail.

¶ Use plastic: If you need money right away, credit card rates are cheaper than the refund anticipation loans, and you can pay off that bill when the refund finally arrives.

¶ Be patient: Usually refunds take between three and six weeks. Unless you need the money today, consider putting off that big purchase for a month.

Source: National Federal Credit Union Association

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