The state Attorney General's Office is warning New Mexico residents and consumers to be aware of a couple of tax-time financial traps -- one the high-cost Refund Anticipation Loans (RALs) and the other, IRS rebate scams, according to a news release.

"We thought it was the right time to let people know about their options concerning these Refund Anticipation Loans," Attorney General Gary King said in the release. "Everyone has heard about the upcoming IRS rebates -- unfortunately, so have the scammers -- so pople need to know they shouldn't give anyone their personal information."

On RALs, the AG's Office warns of those "instant refunds" that turn out to be short-term loans at a very high interest rate, secured by the tax refund check as collateral, the release said.

And scammers are using e-mail messages to "notify" potential rebate recipients, asking them to provide personal financial information so their rebate can be directly deposited. If people reply and send that information back, they will likely be victims of identity theft, the AG's Office said.

Here are the full texts of the AG's warnings:

The Truth about High Cost Refund Anticipation Loans (RALs)

Attorney General Gary King warns New Mexicans to be wary of these Refund Anticipation Loans or RALs. “These short-term, high-interest loans prey on the very people who can least afford them.”

Why you should wait before you borrow

Patience is not only a virtue; it can also save you money. In the hustle and bustle of tax season, consumers, no doubt, have seen the barrage of tax preparers promising “instant refunds.” What they haven’t seen is the disclosures for the true cost of those “instant refunds,” which really are no more than short term loans at a very high interest rate, secured by the collateral of your tax refund check. Be patient. If you file your taxes electronically and have your refund directly deposited into your account, it could take just two weeks to receive your actual refund, without the high interest rate and administrative fees. That is a true indication that RALs are really unnecessary.

Why borrow money that already belongs to you?

In 2006 approximately nine million American taxpayers received RALs. To obtain the loans, consumers paid an estimated $900 million in loan fees, essentially paying to borrow their own money at extremely high rates. Per person these loans typically cost consumers between $50 - $150, which seems like a small amount of money and would be if it were a one year or two year loan, but it’s not. It’s a 7-14 day loan. Consumers often don't realize that they're borrowing their own money at high rates — or realize that they're signing up for a loan at all. Some payday loan companies are even advertising on the web that their loans are better than RALs.

If you must borrow, do so wisely

Many times taxpayers have to use RALs to pay for the preparer services. Taxpayers tempted by RALs should consider cheaper and better alternatives. For example, the Volunteer Income Tax Assistance (VITA) program (1-800-829-1040) and AARP’s Tax Aide (1-888-227-7669) offer free tax preparation for low-income taxpayers. The IRS Free File program is available for taxpayers who earn $52,000 or less (www.irs.gov <http://www.irs.gov/>). Consumers can go to the website, click on the “Free File,” and choose from more than 20 private companies that will file federal returns at no charge. However, consumers wishing to file their New Mexico state tax returns through the same service may have to pay a fee. Some of the free tax preparation programs can also help taxpayers open bank accounts, which allow them to take advantage of the speed of a direct-deposited refund using electronic filing. When filing your tax returns our advice is be informed and be patient.

Possible IRS Rebate Scam Warning:

Scammers have begun using email to “notify” potential rebate recipients and are asking them to provide personal financial information so that their rebate can be directly deposited. If consumers reply and send that information back, they will likely become victims of Identity Theft.

Letters and rebate checks will come through the United States Postal Services. There will not be notification via e-mail. If you receive mail through the Internet regarding your rebate or refund check, you have every reason to be suspicious.

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