Are Tax Refunds Advances Good for your Pocketbooks?

Recently, I was watching some football and a commercial came on that caught my eye. It was talking about the fact that tax refunds won't be available until February 15th. So, the tax company  in the commercial was offering a tax refund advance. I was literally stunned to see this and feared that these advances would be eerily similar to payday lenders. My research actually found some good numbers, but first let's discuss the reason for tax refund disbursements occurring February 15th or later.

Tax refund advances are being offered, because congress passed the PATH (Protecting Americans from Tax Hikes) act on December 18, 2015. This act will be implemented for the first time for the 2016 tax year and the 2017 tax filing season. This act requires the IRS to take more time and make sure that there is not any tax fraud occurring, by holding the funds of any tax filer taking the Earned-Income Credit or Additional Child Tax Credit. This extra time allows the IRS to stop fraudulent refunds from being released to identity thieves.

This may seem like a bogus claim and some people may be frustrated that they aren't receiving their tax refund earlier. I can tell you that it is a real concern, because recently I had a family member that had somebody steal their identity. While they were filing a police report, the police officer mentioned the PATH act and told her about how identity thieves file for taxes with the stolen identity. He reassured her that the new law gives the IRS more time to double check refunds and make sure that somebody won't file for taxes under their name. This can be reassuring to somebody dealing with identity thieves.

I know that this law may be frustrating to some people, but I think it is a smart law to insure the safety of all American citizens money. It shouldn't be a big deal for anyone that has control of their money. For example, last year we didn't file taxes until March. My wife and I don't rely on a tax refund, because we live on less than we make. Sadly, many people rely on tax refunds to help pay bills and other expenses. According to a survey conducted by Liberty Tax, 50% of consumers spend their tax refund in weeks and 14% of consumers spend their tax refund in days.

So, 64% of citizens spend their tax refunds in a couple weeks or less. That is a pretty crazy stat. That means that there are lots of Americans who still spend more money than they make. That means that there are still people who rely on a tax refund to make ends meet. You shouldn't have to rely on a tax refund to pay rent or pay your bills. Rent and bills should be a part of a monthly budget.

What is a Tax Refund Advance?

This is a loan given out to the consumer based on the fact that they should be receiving a tax refund in the future. Some organizations offer loans based on pay stubs and some offer a loan after you file your taxes.

Are there interest or fees charges?

Based on my research, the three major tax companies don't charge fees or interest. That data for the different companies are listed below:

  • H&R Block Refund Advance:
    • Offer 0% Interest loan with no finance charges
    • Only eligible to customers who file taxes with H&R Block and have a tax refund coming to them
    • $1,250 maximum advance
  • Jackson Hewitt Express Refund Advance:
    • Offer 0% Interest loan with no fees
    • Only eligible to customers who file taxes with H&R Block and have a tax refund coming to them
    • $1,300 maximum advance
  • Liberty Tax Easy Advance Loan:
    • Offer 0% Interest loan with no fees
    • Only eligible to customers who file taxes with H&R Block and have a tax refund coming to them
    • $1,300 maximum advance

Is it a good deal?

The tax companies offer no interest and no fee loans to customers who file their taxes with the tax company. Therefore, a tax refund advance does not hurt your pocketbook. There is no interest charge to worry about and the money can be used right away. Even though there is no fees and no interest charge, the tax refund advance can cost you more in filing fees. The three companies offering the service, only offer the service to customers filing taxes in person. Filing taxes in person tends to cost more than filing online. Therefore, the need for a tax refund advance could cost you more in filing fees, and this information is not disclosed on their websites.

I still would not suggest taking out a Tax Refund Advance Loan, because it basically means that you can't wait for your money. Instead, you have to take out a loan that will get you the money a month earlier than if you would have just waited for the actual refund. I would suggest utilizing a little bit of patience and wait for the refund from the government.

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