Tax Refund Advances
Tax season is a stressful time for most taxpayers. Time collecting necessary information, paperwork, and receipts; to say nothing of the hassle of filing rather through an agency or self-filing. The biggest hassle for most filers, though, is the waiting once everything is done. Waiting for money that takes weeks to arrive can be frustrating even with direct deposit. Today, more and more preparers are offering a tax refund advance.
Refund Anticipation Loans
How do tax refund advances work?
Tax refund advances are loans against an anticipated refund and are a great way to quickly receive any refund owed to the tax filer, usually within a day or two after the IRS receives the filer's refund information. Once a refund is totaled the provider can offer all or part of the original refund amount as a loan. This allows the tax filer to receive his or her refund usually within 24 to 48 hours, freeing up the money to pay bills or take that vacation. Some tax preparer agencies do not offer a refund loan but more agencies are added every year.
Cost to filers for a tax refund advance.
There is a fee associated with these types of loans but most providers will deduct the fee from the refund amount. This does reduce the amount of refund but it is a small price to pay if the tax filer cannot wait and once the loan is received, the taxpayer is finished. No waiting on a check or deposit. The loan provider will do the rest. The fees will be paid from the refund amount and the provider will receive the actual refund.
How to determine if a tax refund advance is the best option.
A tax refund advance would be a good option for someone who needs money fast, making it possible to save on late fees for any bills that might be due. If the filer can wait for their refund it would save them the additional fees for a loan, thereby, receiving their full refund.
Two major things need to be considered before applying for a tax refund advance. The time it will take to receive the money and if they can wait; and the fees associated with a tax loan. In some cases, it might make more sense to wait a few extra weeks to receive the money but if the filer needs the refund quickly, than a tax advance loan might be worth a reduction in their refund.