Did you receive a refund advance from one of the big tax preparation companies using just your payst

Did you know that you are not obligated to have that company file your tax return?

While you are obligated to pay the bank back any advance you received, the initial entry done was only an estimate of your expected refund. They cannot legally file your tax return until you provide them with the actual W2. Many people feel like they are committed to the tax preparation company who they received this advance from. This is not the case.

While finishing your tax return with the same company may be the easiest way to pay the bank back for the advance, it is not the only way nor is it required. You can file your return elsewhere and send a check or money order to the bank when you receive your refund.

Some companies are offering a second advance when a customer has the necessary forms to finalize their tax return. At this point they will be finishing the return and setting it up to be efiled to the IRS. Once it is signed off and transmitted it cannot be stopped.

The advances being offered are 0% interest so they are free, but are they?

It is important to compare how much you will be charged for tax preparation compared with what it would cost elsewhere. To provide you an advance, the preparation company must pay the bank a fee. Most are not eating this cost. They are making up for it by charging higher fees than others for tax preparation. If you pay considerably higher fees to have your taxes done than you could have paid elsewhere, is it really free.

Advances against tax returns are nothing new. Refund Anticipation Loans in one form or another have been around for a long time. They are aimed at taxpayers who are typically in lower income brackets, have greater need for cash quickly and due to tax credits available tend to have large refunds coming.

The difference between the original “RALs” and today’s refund advances are due to federal banking regulations and IRS processes changing. While they went away completely for a few years, the banks and tax preparation companies have been able to bring them back. However, instead of the client paying the bank fees, the tax preparation companies are paying the banks for providing the “loans”.

Since the IRS is processing refunds later than ever this tax season a small refund advance may be just what some people need while waiting for the bulk of their money to come. Each person has to make that choice for themselves. By making sure that you fully understand your personal tax return, fees being charged, conditions of filing and obligations you will be able to make an informed decision on what is best for you.