Are Tax Return Advances a Good Thing

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Unfortunately, this year tax returns may be delayed due to budget cuts and overloaded workers who won’t be able to process refunds as quickly as they have in previous years. According to the IRS Commissioner John Koskinen, some refund checks could be delayed a week or more especially for those who filed paper versus those who filed electronically.

This may drive people to look for private alternatives like refund anticipation checks through their tax preparation company. Before jumping onto this train it’s important to know the facts so you can make an informed financial decision. Instant cash comes with a hefty price.

This year H&R Block, Jackson Hewitt, and many more tax preparation services are offering an advance on your tax refund. What your grandparents used to say is true, nothing in life is free, and you could be spending more than 20% of your refund to receive your cash early.

If you are still considering these services, we urge you to ask the following questions and obtain the facts in writing:

  • What is the interest rate?
  • What fees are you being charged?
  • What happens if your tax refund is less than what you thought it would be?
  • Are you paying a higher tax preparation rate because you are having them take it out of your refund?
  • What are the bank and processing fees?

The best thing you can do is find a way to live within your means and wait for your refund to be mailed or electronically deposited into your bank account from the IRS. Here are some ways to help keep your refund wait time to a minimum.

Electronic Filing

Forget the paper return that has to be sent via the U.S. postal service and file electronically from your computer. When you do this you will receive your money almost as fast as you would with a refund anticipation loan, without the fees. Those filing paper returns can expect to wait up to eight weeks for their tax refund whereas those who file electronically will receive their checks in half time.

Direct Deposit Deposit

This year the IRS has projected that they will issue 9 out of 10 tax refunds within 21 days of filing. For 2015, the fastest way to receive your refund is to file electronically and choose direct deposit. If you do choose to file your return using good old-fashioned paper you will still save time if you have your refund deposited directly into your bank account.

Whatever you decide to do, make sure you are informed. Be sure to check out the 2015 tax refund schedule below.

 

2015 Tax Refund Schedule:

IRS Return ProcessedDirect Deposit Sent BeforePaper Check Mailed
Jan. 21-Jan. 27Feb. 3Feb. 4
Jan. 28-Feb. 3Feb. 10Feb. 11
Feb. 4-Feb. 10Feb. 17Feb. 18
Feb. 11-Feb. 17Feb. 24Feb. 25
Feb. 18-Feb. 24March 3March 4
Feb. 25-March 3March 10March 11
March 4-March 10March 17March 18
March 11-March 17March 24March 25
March 18-March 24March 31April 1
March 25-March 31April 7April 8
April 1-April 7April 15April 16
April 8-April 15April 22April 23
April 16-April 22April 30May 1

Source: IRS, author estimates.

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