It’s hard to wait for your income tax refund check when you need your money sooner. If you know you’ll receive a reimbursement when filing your return, you may want to consider a tax refund loan.
Some tax preparation services offer tax refund loans or refund anticipation loans. You receive an interest-free advance, as a paper check or direct credit, to a card or bank account. Tax refund loans typically require no credit check. The application process is uncomplicated, but it’s not free. Tax preparation companies charge for filing services to get your tax return money in advance.
Here’s what you need to know about tax refund loans to decide if one is right for you.
What Is a Tax Refund Loan?
A tax refund loan is a short-term loan or advance on money you expect to receive after filing a federal tax return.
Tax preparers offer advance loans ranging from $200 – $3,200 what your return will be. You can apply for a tax refund advance in January, and most tax preparation services keep their application window open through February.
How Do Tax Refund Loans Work?
Once you receive all your W-2s, 1099s or any other tax return documentation, you need to file your federal income tax return. After you file, you can apply for a tax refund loan.
If you decide to use a tax preparation company that offers advance loans, you may have to go in person. Some tax preparation services let you file your federal income tax return yourself. Before submitting your finalized return, you’re given the option to apply for a tax refund advance online.
You’ll qualify for a tax refund loan if you don’t owe any money and meet the minimum loan amount required by the tax preparation company. However, it’s important to note that if you borrow more than your final tax return, you’ll have to repay the lender what you owe.
Sometimes, your money will be sent to you by prepaid debit card within 24 hours. If you don’t have a bank account, some tax preparation companies will set one up for you. If you decide to receive a check in the mail, your tax refund advance may take a few weeks to get to you.
How Much Does a Tax Refund Loan Cost?
In general, tax refund loans are interest-free advances. But there can be fees and other costs associated with getting your money early.
One reason why this service is provided is to gain your business. If you use a tax preparation company to get a tax refund loan, you’ll be charged to use their tax filing services. Depending on the complexity of your return, tax preparation services can cost as low as $59 or up to a few hundred dollars.
To receive your tax advance refund loan, expect to pay:
Lenders who offer advance tax return loans may charge a processing fee of around $100.
You may be charged a service fee to access funds, use your card or do balance checks. You may also be charged ATM fees when you withdraw money using your card or when making purchases.
To receive your loan by check, some lenders charge a processing fee of around $25.
You may be charged a fee to receive your money quicker with a refund account.
You’ll want to consider your financial situation to decide if getting an advance tax refund loan is worth the associated fees and cost of services.
What Are the Pros and Cons of Tax Refund Loans?
If you have an emergency and need your money sooner, a tax refund loan can help you to get through a tough time.
interest charged to access your money, although you may pay some associated fees. These fees may be less than what you would have paid with a personal loan or a credit card.
You can use your tax return to pay off any existing high-interest debt faster.
You don’t need to have good credit to be approved. There’s no impact on your credit score
You’re required to use the tax preparer’s service, so you can’t file manually on your own.
You have to pay for the tax preparer’s services, which could result in a lower refund. If you typically prepare your own taxes, you may pay more than you otherwise would.
There can be fees associated with prepaid cards and withdrawals from refund checking accounts. If you use a lender, expect to pay application fees.
Deadlines for tax refund loans are at the start of the year. If you don’t have all your paperwork ready before the end of February, you may not be able to apply.
If you have a federal tax lien or owe child support, you may not qualify. You may need to borrow money elsewhere if your tax return doesn’t meet the minimum amoun
Can I Be Denied a Tax Refund Advance?
Depending on your overall financial situation, there are several reasons you could be denied a tax refund advance loan. These include:
- Federal refund was not $500 or more
- Owing the U.S. government or your state
- Having debt enforced by a state (child support obligations, past student loans, tax liens and any other payments owed to a federal or state agency)
- Not passing the lender’s final evaluation
What Are Some Tax Refund Loan Alternatives?
If you realize a tax refund loan isn’t right for you, there are other ways to access the money you need.
- Waiting for your refund
- Using a small personal loan
- Using credit cards with introductory 0% APR offers
- Using payday loans (although we don’t recommend this option due to the cost associated with payday loans)
Where Can I Get a Tax Refund Loan?
You can get a cash advance on your tax refund from any reputable lender or tax preparation company that offers tax advance refund loan services.
A few tax preparation service providers you may want to consider include:
H&R Block® provides tax refund loans without impacting your credit score. The application is easy and processed during January and February.
There are no loan fees or interest charges. Your federal tax refund must be no less than $250. You pay to process your tax return, but your money becomes available the same day and is accessible on a prepaid credit card.
You have to be 18 years of age or older to file your tax return with one of their specialists.
Jackson Hewitt® offers several types of advance loans during January and February. If you use their services, you may apply for an Early Refund Advance loan, the Refund Tax Advance loan or the No Fee Refund Advance loan.
To apply for one of their tax advance loans, you need to meet with one of their tax preparation specialists in person.
You’ll have to pay to have your tax return processed, but Jackson Hewitt® states that your loan is available within minutes and loaded onto a prepaid card.
You can complete your own federal income tax return online using their software.
There’s an opt-in feature available. Before submitting your federal tax return to the IRS, you’ll be offered an advance tax return loan. If you opt in, you’re routed to Credit Karma Money to qualify for a checking account or receive your money on a prepaid debit card in the mail.
Only a portion of your tax refund will be issued. After IRS approval, your remaining refund balance is wired to your checking account or prepaid debit card.
Patience Is a Virtue
Applying for a tax refund loan is easy if you’re within the application window, typically between January and February.
These types of short-term loans are generally low-risk and easy to apply for without hurting your credit. But if you fall outside the application window, other loan options may help you access the money you need.
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Experian. “How To Get a Loan Against Your Tax Refund.” Retrieved August 2022 from
TurboTax®. “Refund Advance.” Retrieved July 2022 from https://turbotax.intuit.com/refund-advance/
Jackson Hewitt®. “Refund Advance.” Retrieved July 2022 from https://www.jacksonhewitt.com/refund-advance/