| This tax season, many taxpayers will accept an | | | | Lenders have no problem with this risk because |
| income tax refund advance. Most of these | | | | the odds of getting their loaned money back are |
| individuals will not fully understand the exact | | | | excellent. The Internal Revenue Service approves |
| nature of this refund anticipation loan. | | | | virtually all returns within a week of their |
| The process is easy; the individual completes and | | | | submission. Even if a few returns end up being |
| submits their federal and perhaps state tax | | | | rejected, the amount of income earned on the |
| returns. They then receive a loan from a lender | | | | huge majority that do pass IRS inspection justifies |
| who could be connected with the tax preparation | | | | the relatively few losses on return rejections. |
| or could be independent. The loan repayment | | | | If the IRS decides that the return is inaccurate, |
| comes out of their refund, which goes to the | | | | incomplete or IRS objects to some deductions, |
| lender. Unfortunately, many of these taxpayers | | | | the refund could be delayed, reduced or |
| do not understand the risks they are taking when | | | | eliminated. IRS may refuse to pay the refund as |
| they accept one of these loans against their | | | | requested and then the borrower must struggle |
| refund. | | | | to repay the income tax refund advance out of |
| Most income tax refund advance loans are | | | | their own funds. If they are unable to fulfill the |
| provided by the companies who also prepare the | | | | loan conditions, their credit rating, future credit |
| returns, including H&R Block, Jackson Hewitt and | | | | worthiness and credit interest rates could suffer. |
| Liberty. They have small or temporary offices set | | | | Some tax services are able to protect their own |
| up in low income areas filled with working class | | | | interests by recovering anticipation loans that |
| people who do not understand that what they | | | | were not repaid from tax refunds in future years. |
| receive is a loan, not their actual refund. | | | | The wisest course for most taxpayers is to avoid |
| The risk lies in the possibility that the refund may | | | | the process unless they are in truly desperate |
| not come through as hoped from the Internal | | | | need of immediate funds. This eliminates all |
| Revenue Service. The borrower is obligated to | | | | concern over being able to repay the loan or |
| repay this loan regardless of what happens when | | | | getting the refund in time to avoid any extra |
| IRS receives and reviews the paperwork. The | | | | interest or late charges. |
| lender is also going to charge the borrower with | | | | The emergency needs to be very immediate, |
| interest and fees for the loan whether or not IRS | | | | because IRS processes refunds quickly. Those |
| accept it. | | | | who file electronically and have their refund direct |
| The tax filer needs to understand that the tax | | | | deposited frequently get the refund within a week |
| preparers do not have the final say on the validity | | | | at no charge from IRS or the bank. Even refunds |
| of the return. The preparer only fills out the | | | | submitted by mail usually get processed within a |
| forms and submits them on behalf of the filer. | | | | month if submitted early in the tax season. |
| Only IRS has the authority to determine the filing | | | | Most important to the tax filer is the knowledge |
| is acceptable and then process it. | | | | that they are getting every penny of their hard |
| The approval by IRS happens after an agency | | | | earned money. None of the refund is going to the |
| official reviews the return and determines that it | | | | preparer on top of their charges for preparing the |
| is accurate, complete and includes required | | | | return. The money that was going toward loan |
| documentation. The review process takes several | | | | interest and fees is instead going into the |
| days to several weeks depending on whether the | | | | taxpayer's pocket. There is really no point in an |
| return was filed electronically or by mail. | | | | anticipation loan for most individuals. |