But if you’re one of the few who decide to file months in advance, you’re eligible for a tax refund advance. This advance can really come in handy for anyone with a cash shortage.
In this article, I take a closer look at what a tax refund advance is and how you can secure it for yourself.
What is a tax refund advance?
A tax refund advance is essentially a short-term loan that is funded with your expected tax refund. You can also hear these loans as an immediate repayment.
The lender provides a short-term loan that is repaid after the IRS has processed your actual tax refund. In most cases, you will not receive a loan for the full amount of your expected repayment.
The total amount that you may qualify for generally ranges from $ 200 to $ 3,500. However, the exact amount you qualify for depends on how much you are expected to get back from your refund.
When you take out a tax refund advance, the provider usually makes the money available within a few days.
How do I get an advance on tax refund?
If you are short on money and can immediately use the money from your tax refund, an advance on tax refund can be a good option. It can be a great way to ease your immediate cash needs without a high interest rate.
Collect your tax documents
The first thing to do if you want a tax refund advance is to start working on your taxes. You can ensure a smooth process by collecting all the documents you need before you get started. Check the list below for the documents to look for:
- W-2 – If you have a regular job, you probably have a W-2 that reports your wages and salary information.
- 1099s –If you have an afterthought or an unconventional gig as a self-employed contractor, you may have 1099 to submit alongside your W-2.
- Schedule C – If you have a business, this form allows you to report that company’s earnings and losses.
- 1098 – If you have a home this year and you paid mortgage interest, you must report this.
- Quarterly tax record – If you have paid quarterly taxes year-round, include it in your documents.
- Personal information – You must provide your Social Security number and some of your bank details to complete your tax return.
Although this is not an exhaustive list of all that is possible tax documents you need, it is a good place to start.
Submit your taxes and then request a refund
While you can choose to file your taxes on your own, it is usually a good idea to work with a tax software or a tax professional. The forms provided by the IRS are not necessarily easy to interpret, which can only make it stressful to file only your taxes.
I personally work with a tax professional because it takes the worries out of the tax season. I just provide the information and they let me know if I will receive a refund or write a check to the IRS.
To apply for a tax refund advance, you must work with a tax authority that issues tax refund advances. If for some reason you want to work with a professional or tax software, TurboTax and H&R Block are two good options.
To receive a tax refund advance through TurboTax, you must file your taxes through this company. After filing your taxes, you must wait for the IRS to accept your tax return.
Once your forms are accepted, you may be able to receive money within two days. The money is available on your Turbo Visa debit card. While you can use this money for online purchases right away, you need to wait 10 days for your physical Turbo Visa debit card to arrive by mail.
All tax refund advances through TurboTax are funded through First Century Bank. The amount that you qualify for is based on your expected tax return and personal information. There are no costs associated with this advance.
H&R Block offers its customers advances on tax refunds through the H&R Block Emerald Prepaid MasterCard.
To apply for a tax refund advance, you must have your taxes prepared at a participating H&R Block location. Once the refund is accepted by the IRS, you can receive your money the same day at no cost.
All tax refund advances through H&R Block are financed through Axos Bank. You will receive money based on your tax refund status, credit history and personal information.
Who is eligible for an advance on tax refund?
Generally, you have to work with some tax preparer to get a tax advance back. Whether you choose to work with a tax preparation software or a personal professional, that can open the door to a tax refund advance.
Of course, if you owe money on your taxes, you cannot claim a tax refund. Or if you expect only a very small tax refund, some companies may not be willing to provide an advance.
Should I use my tax refund as an emergency loan?
In general, an advance on tax refund could serve as a useful emergency loan. Since most of these loans have no fees and 0% APR, it doesn’t cost you anything to get these loans from some tax preparation companies.
However, you do have to pay for the tax preparation assistance, which can cost anywhere from $ 20 to hundreds of dollars. Depending on your tax situation, it may or may not be worth seeking an advance on tax refund.
Other ways to fund your emergency
If you need cash quickly, you have other options. A few good ones include:
- Personal loans – Many lenders offer painless online loans at relatively affordable interest rates.
- Build an emergency fund – A emergency fund is a perfect way to navigate life’s unexpected financial emergencies. Many experts recommend cutting costs between three and six months.
- Increase your income – Yes, this is easier said than done, but it is completely possible. Imagine what you could do with it a side effect that made an extra $ 1,000 every month!
A tax refund advance can help you finance your immediate financial needs. These advances are generally accompanied by no fees or interest. However, you will likely have to pay for your tax preparation.
Think about your unique tax needs before making a decision about whether or not to pursue a tax refund advance.