A tax return loan is a cash advance offered by tax preparation companies, allowing taxpayers to receive their refund within 24 to 48 hours, but fees are deducted from the refund, reducing the amount received. Qualification requirements vary, and fees may include loan origination and finance charges.
A tax return loan is a cash advance offered to taxpayers who want a quick tax refund. With a tax return loan, a person does not have to wait the standard time it normally takes to receive a refund from the local or regional tax authority. Instead, a person can receive a refund within 24 to 48 hours, usually from a tax preparation company. The tax preparation company usually charges a fee to issue the tax refund loan and accepts the refund from the tax authority as a refund of the loan.
Generally, there are certain requirements that a taxpayer must meet in order to qualify for a tax return loan. First, the loan is not available to everyone who files tax returns. The loan amount may also determine if a taxpayer qualifies to receive the cash advance. Most taxpayers complete an approved or denied loan application. Other requirements may vary based on criteria established by a tax preparation service.
Generally, the tax refund loan is paid by paper check or electronic transaction. After approval of a tax refund anticipation loan, fees are deducted from the refund and the taxpayer receives the balance. The full amount of the refund goes directly to the tax preparation service to pay off the loan. The service usually receives payment after the tax authority processes the tax return.
Several types of fees are generally associated with a tax return loan. Some tax preparation services charge a fee to prepare a tax return; others might waive the fee if the taxpayer agrees to receive the cash advance via electronic payment. A loan origination fee may be added to cover the administrative costs of processing the payment quickly. Additional fees may also include finance charges issued by the bank approving the advance.
There may be some advantages to receiving a cash advance for a tax refund. The taxpayer receives the refund faster than the standard filing period directly with the tax authority. This eliminates a longer waiting period if funds are needed to cover an emergency or planned major purchase. Another advantage is having a preparation service to prepare the tax return.
One downside to receiving a tax refund loan is the associated fees. Fees reduce the refund amount. This means that the taxpayer receives less money than he would otherwise have received if he had waited until the tax authority processed the return. Fees are generally non-refundable. If the taxpayer has a tax liability, they still must pay the fees even if the early refund is not received.
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