Tax Refund Cash Advance: Can They Benefit You?
When you are in need of quick cash, the options available to you may be limited. Although you must consider the advantages and disadvantages like with any other type of loan, you may be able to receive assistance through a tax refund cash advance.
What Is a Tax Refund Cash Advance?
A tax refund loan is more commonly known as a refund anticipation loan (RAL). This loan is typically offered to consumers against their tax refunds by tax preparation companies. The loan application can be approved within minutes with the funds released in one or two business days.
The total loan amount for a tax refund cash advance depends on the full amount of the tax refund. Once the tax refund check has arrived at the tax preparer’s office, the loan amount and its accumulated fees are then repaid. Any remaining balance is then sent to the recipient. However, to get the most out of your loan, make sure that you comparison shop between different companies for the best rates.
Many people may decide to use such loans when they simply cannot wait for their tax returns. The loans are then typically used to take care of emergency expenses, such as car and home repairs or medical expenses.
Do Tax Refund Cash Advances Require Credit Checks?
A tax refund cash advance does not require a credit check. However, the tax preparation company will contact the IRS to learn if there are any liens against the tax refund. Liens may be placed for overdue student loans, state taxes, back taxes to the IRS, back child support, and more. If any liens are found, the loan amount may be limited or the loan application may be denied.
What Do the IRS Think About Tax Refund Loans?
The IRS has stated that it will no longer give refund processing companies consumer information. This is because the IRS believes that providing refund processing companies with consumer data is causing them to infringe on the privacy of the American taxpayers.
To help with financial difficulties, the IRS offers free tax preparations through their website. By doing so, the IRS is hoping that the quick processing of the tax refunds will eliminate the need for tax refund cash advances.
Companies, such as Jack Hewitt and H&R Block, originally claimed that eliminating the service could limit the financial solutions of taxpayers that need fast cash. However, H&R Block stopped offering the service for the 2020 and 2021 tax seasons since they felt that refund anticipation loans were no longer an important product. They stated this because of how the IRS reduced the waiting time for tax refunds from eight weeks to two weeks or less in the 2021 tax season.
Other Types of Tax Refund Options
If you cannot take out a tax refund cash advance, you may want to consider:
* Electronically filing your taxes. In doing so, you can receive your refund in as little as two weeks. If you have an active bank account, you can even have the funds directly deposited to receive the refund in a shorter amount of time.
* Prepaid debit cards. You can use a prepaid debit card to accept electronic deposits, and many tax preparation companies will offer you one when you file your taxes with them. Once your refund has been loaded onto the debit card, you can immediately access the money.
Although a tax refund cash advance is not for everyone, there are instances that they may prove to be beneficial. However, given their potential to create more debt if mishandled, it is important that you determine beforehand how to responsibly manage the funds.