Posted by Fred Lake

Understanding Tax Refund Advance Loans

Understanding Tax Refund Advance Loans

It feels somehow having to share your hard-earned money with the government as tax. However, the bright side for many people is that they will get a tax refund. And the IRS has been faithful in returning excess cash to taxpayers.  

There are times, however, that you need money urgently. Waiting for weeks for the IRS to process your tax refund might not be feasible. This is where tax refund advance loans come in. This is a short term loan collected in anticipation of your tax refund. It is like borrowing what is yours and paying it when your tax return gets to you. 

While a tax refund could be a lifesaver when you are pressed for funds, it is essential to understand how a tax refund works. Not only that, you need a knowledge of the pros and cons to decide if it is the right option for you. 

Tax Refund Cash Advice as Emergency Loans 

Ideally, it is best to consider tax refund cash advance in times of dire emergencies. Taking a cash advance is taking on debt, even though the money is technically yours. Most times, tax refunds are backed by the banks in which the expected tax refunds act as the guarantee.

There is a probability, however, that the bank will run a background check on your credit before giving the loan. The IRS pays the lender the tax refund advance loan directly while you get the balance. As a result, there is less probability of you defaulting on a payment.

Working with a tax preparation company like Jackson Hewitt qualifies you for a tax cash advance at a low cost or free of charge. There could be cost involved, even though tax preparation firms offer these services as an enticement. Besides, these are short term loans; hence some providers might not charge interest.

You might also get a tax refund loan from a company that didn't prepare your tax. They, however, offer a pretty higher fee and with interest. This is why we recommend tax refund advance loans for real emergencies.

How to Get a Tax Advance Loan 

While the details and charges defers, many tax preparation company offer tax refund advance as part of their incentives. A few of the company are:

  • TurboTax
  • Liberty Tax
  • TaxSlayer
  • Jackson Hewitt
  • H & R Block

The various companies offering these services have different policies regarding this service, although there are some similarities. They all have a minimum refund ranging from $300 to a thousand dollars or more. The refund you get is a factor of your total tax refund.

H & R Block, for instance, offers refund loan in the range of $500, $750, $1,250, and $3,000. The loan you can take will surely be less than the expected refund. Some companies have limits on the time of application. 

It is essential to be careful of firms offering loans based on your W2 form rather than your completed tax form. While you might be eligible for a loan based on your predicted tax return, you might be borrowing more than you can afford if you do not know what you are getting back precisely.

Recommended Alternatives for Tax refund Advance Loan 

As emphasized, a tax refund advance is not recommended unless it is a dire emergency. You are better off waiting until your tax refund arrives. Bear in mind that you will most likely have your tax refunds less than three weeks. The probability of this is even high if you file electronically or use direct deposit.

With this, you will not subject yourself to extra fees and interest. Bear in mind; also that tax refund advance comes with additional preparation fees, which you need to pay. To make a simple return, form 1040EZ will come in handy in helping you file your tax. This will save the extra expenses of hiring a pro tax preparer. Tax counseling for the Elderly or IRS' Volunteer Income Tax Assistance are programs that will be of help if you need help filing your tax. 

If you need access to quick cash, try personal loans, payday loans, or credit card loans. If you, however, want to go for a tax refund loan, be sure to understand how it works. Know about every hidden fee and consider various options before deciding the company to patronize.

Fred Lake
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