In an effort to jump-start the U.S. economy, Congress recently approved a new economic stimulus package directing the Department of the Treasury to send ''economic stimulus payments'' to over 130 million individuals and families beginning in early May. Payments will range from $300 to $1,200, with an additional $300 for each qualifying child. Do not confuse this with your income tax refund, which will arrive separately. It is a one-time payment meant to assist American families and help the economy.
This provides quite an opportunity for most of us to catch up on bills, buy gas or groceries, or to replace that long-worn-out refrigerator. Unfortunately, this is an opportunity not only for people who need an extra financial boost, but for the predatory tax preparers and payday loan vendors promising instant, on-the-spot payments. Don't be fooled! These ''deals'' are not deals at all - they will cost you and will eat away at this one-time opportunity. These services come with huge interest rates and hidden fees.
Picture this scenario: a married couple with three children is expecting a $2,100 check in May. However, they are enticed by an offer to get their payment early by a predatory tax preparer and accept a payment of $1,600 in April. The reality here is that this family has just agreed to a loan with an annualized interest rate of 190 percent. They have just given away $500 of their much-needed and deserved rebate!
This is not just a hypothetical scenario. Instead, real-life situations just like this are played out over and over again each year at tax time. Hard-working families give their hard-earned money away on the promise of quick and easy money. The anticipated economic stimulus payments present another opportunity for predatory lenders to acquire a portion of your income.
So, whether you need to pay your bills, get clothes for the kids or put gas in your car - the list is probably endless - if you are considering going to a payday lender to borrow against your stimulus payment, or using a paid tax preparer that will give you your money ''instantly,'' please reconsider. Think about using a free tax preparation site instead. The IRS sponsors Volunteer Income Tax Assistance sites that are staffed by trained and IRS-certified volunteers. These volunteers will prepare and file your tax return for you free of charge. To find one, you can call (800) 829-1040 or contact your local or tribal government office.
The money you save by not going to predatory lenders are dollars that you and your family need - $500 can buy a lot of groceries and gas, and can go a long way toward the purchase of a handsome new refrigerator. But there are other ways to put your economic stimulus payment to work for you. For example, consider putting the amount you will save by not going to a payday lender - or even your entire payment - into savings, or open up an Individual Development Account, a matched savings account that will match your $500 by giving you $1,000 or more if you are saving for a house or a business! Now that is an opportunity! To find out if your community has an IDA program, contact your tribal government, your local Native Community Development Financial Institution or other local nonprofit financial services. For information on how to start an IDA program in your community, call us at Oweesta.
There is another important note to point out regarding the economic stimulus payments. All you have to do to receive your payment is file a 2007 tax return, even if you don't owe taxes and normally do not have to file. This affects, for example, the elderly or disabled receiving Social Security, retired persons, and certain veteran's payments. Just visit your local VITA or other free tax preparation site. They will help determine your eligibility and file your return for you. It's that easy.
As President Clinton and California Gov. Arnold Schwarzenegger said in a recent editorial in The Wall Street Journal, ''A New Initiative: Beyond Payday Loans'' (Jan. 24, 2008), ''Imagine the economic and social benefits of putting more than $8 billion in the hands of low- and middle-income Americans. That is the amount millions of people now spend each year at check-cashing outlets, payday lenders and pawnshops on basic financial services that most Americans receive for free - or very little cost - at their local bank or credit union.''
Now, granted, this amount breaks down to a lot less for our Native communities, but payday lenders and predatory tax preparers still get more than their fair share of our precious incomes. I have said many times, fellow tribal members: If we are to take our rightful place in this country, we must begin to build assets and, yes, think about what it would mean to have wealth. When we do that, we will be creating our own opportunities.
For more information on the economic stimulus payments, visit www.irs.gov.
Elsie Meeks, Lakota, is the president and CEO of First Nations Oweesta Corporation and the chair of the Native Financial Education Coalition. For more information, visit www.oweesta.org/eitc, www.ournativecircle.org or www.nfec.info.