What to Know Before You Take Out a Tax Refund AdvanceMany people get excited about tax season just like they do when it’s time to visit the dentist. But there’s no need to be stressed, worried, or anxious. Sure, filing taxes can be time-consuming and confusing, but if you get the right help, tax season can feel more like Christmas morning! Finding out that you’re owed a sizable refund, or discovering new tax credits that put more money in your pocket, is oh-so-sweet. Some people can’t wait to get that money returned to them and consider taking out a tax refund advance. This is an easy way to get your refund as soon as possible, but, there are a few things you should know before you get an advance on your tax return. Keep reading to find out!
- What is a tax advance loan?
- Advantages and disadvantages of a tax refund advance
- How to get an advance on tax returns
- What to do after you file your taxes
- Wrapping Up
What is a tax advance loan?A tax advance loan is when a tax preparer loans you a portion of your tax return in advance. When you normally file your tax return, it will take around 21 days for you to receive your refund in the form of a check by mail or direct deposit from the IRS. However, with a tax refund advance, you can get a portion of your refund in as little as 24 hours. It’s important to remember that a tax refund advance is a short-term loan against your income tax refund. You get this loan before the IRS actually processes your return. Tax preparers look at how much you’re expected to receive from your tax refund and base the loan on your projected refund amount. It’s advised to consult with a professional to answer any tax refund questions you have and to properly fill out your return.
Advantages and disadvantages of a tax refund advanceIf you’ve been researching early income tax loans or a cash advance on income tax refund, you’ve probably come across different opinions on whether or not you should take the advance. As with all decisions, there are advantages and disadvantages. We’re here to help you make that decision for yourself. Below, you’ll find out more about the pros and cons of tax refund advances so you can decide whether this option is right for your current financial situation.
- You can get your money faster, in as little as 24 hours.
- Almost all tax refund advances come with 0% APR. This means you won’t pay anything extra besides the standard cost of tax preparation services.
- A tax refund advance won’t affect your credit score and most tax preparers don’t check your credit score prior to issuing you a tax advance loan.
- Because a tax advance is a loan, you’ll technically be in debt until you receive your actual refund and pay it off.
- You can’t get the entirety of your refund in your tax advance. Tax preparers will only issue you a portion of your refund with a set dollar amount.
- If you have a difficult tax return, the cost of using a tax preparer to file your tax advance refund can be more expensive than your actual refund amount.
- Since your loan is based on an anticipated return amount, if you end up receiving less money on your tax return, you could face high interest rates and penalties if you don’t promptly repay the loan.
- There’s a chance Uncle Sam could deny your income tax return. It’s always better to use a tax preparation service to avoid this error, but if your return is denied, you could have a hefty loan looming over you and find yourself in the need of tax resolution