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Can I Get a Loan Against My Tax Refund?

Yes, you can get a loan against your tax refund if a “tax advance refund” is offered by the tax preparation service that you choose. The tax preparation companies don’t loan you the money directly.  

Instead, they partner with a bank who will lend the money. Once your tax refund is received, that amount or a portion of it goes to the bank to pay off the loan. These loans can be useful if you need cash right away instead of waiting for your tax refund to arrive.

Tax advance refunds are considered loans and many are advertised as having no fees or not charging interest, but it’s very important to read the fine print.

What Is a Tax Advance Refund?

A tax advance refund is a free short-term loan that allows you to get your refund amount sooner. The loan amount offered is based on your expected tax return refund. Usually, you will have to have your taxes filed by the same tax preparation company ahead of their advance refund deadline—which for most preparers was before February 28, 2018.

How Long Will It Take to Receive My Tax Advance Refund?

Tax advance refunds in some instances are given the same day or within 24 hours of applying depending on the tax preparer chosen. That immediacy can be appealing for some as the IRS has stated that they expect to issue more than 90% of federal tax refunds in less than 21 days. Certain tax returns may take longer to review and be sent out later than three weeks.

Who Are the Tax Preparation Companies?

More known tax-preparation companies, including—H&R Block, Jackson Hewitt, Liberty Tax—have office locations across the country. There are some online tax preparers that offer tax advance refund loans as well. Many of those tax preparation companies are offering advances on federal tax refunds up to $3,250—an increase of nearly $2,000 over the maximum amount offered in 2017.

How Do I Qualify for a Tax Advance Refund?

If you expect to receive a refund from the IRS then you are eligible to apply (the deadline to submit was February 28, 2018). Depending on your expected tax refund amount, there may be a minimum loan amount that you can borrow, ranging from $100 to $500, depending on the tax preparer that you choose.

Will a Tax Advance Refund or Loan Cost Me Money?

Many tax preparation services will offer a tax advance refund or tax loan with no interest or fees, but they will charge you for preparation fees to file your taxes or process the loan. Those costs can take a cut out of your expected tax refund amount.

The IRS offers free tax software to file your taxes if your income is below $66,000. It is also important to note that your tax advance refund or loan may be issued to you on a prepaid debit card, and that card may carry associated fees.

Will a Tax Advance Refund Loan Hurt My Credit Score?

This depends on how the bank providing the loan qualifies you during the application process. If there is a hard inquiry made into your credit report then yes, your credit score will be impacted. If your bank just reviews, or only makes a soft-inquiry into your credit report, then your credit will not be impacted.

What If Your Tax Refund Is Lower Than Your Tax Refund Loan?

Your tax refund can sometimes end up being less than the amount you borrowed on your tax refund loan as a result of a miscalculation by the tax preparer. The IRS may have declined a deduction you claimed as well. Any event, you are still responsible for paying off the loan and lender knows that a substantial portion of the loan will be repaid since they partnered with the tax preparer. Many of those banks consider these as a low-risk loan, but an obligation to pay the full amount is still expected.

In some cases, the tax preparer will forgive the difference between your estimated refund amount and the actual refund if they are different, but you should ask what their rules are for this and what you are responsible for before signing. The IRS might have withheld funds for unpaid debt such as child support or tax liens. This can happen if you are subject to an offset, which means you owe money, as part of the Treasury Offset Program (TOP).

The IRS could reduce your refund if you have any of the following:

  • Overdue federal tax debts
  • Past-due child support
  • Federal agency non-tax debts
  • State income tax debt
  • State unemployment debt
  • Student loan debt
  • Small Business Administration (SBA) loan debt
  • Department of Housing and Urban Development (HUD) loan repayments

If you think a tax advance refund loan is right for you, then you should apply. Make sure to research the tax preparation service you plan to use ahead of time and ask questions to make sure if there are fees or costs required. You can research qualified tax preparers through the IRS Directory of Federal Tax Return Preparers with Credentials and Select Qualifications as well.