Released: February 18, 2019

Help Desk FAQ

What should I know about tax refund advance loans?

With a refund advance loan (RAL), you borrow part of your refund upfront; loan fees and any interest are taken out of your tax refund. (If you also delay paying your tax preparation costs with a refund anticipation check, those fees will be deducted from your tax refund along with your RAL fees.) Refund anticipation loans are advertised as a great way to access your money much quicker, for what many lenders characterize as just a small fee.

Actually, the IRS typically processes refunds for those who file electronically in as little as ten days anyway, so a loan doesn’t get the money into your pocket that much faster. And that supposedly small fee, when calculated as an annual percentage rate (APR), often translates to an interest rate of as much as 50% to over 500%.

In August 2010, the IRS announced that it would no longer provide tax preparers and lenders with information about whether or not taxpayers owe back taxes, since refund anticipation lenders used that information to determine whether or not the taxpayer would receive their full refund or if some or all of it would be withheld to cover money owed to the IRS. One major tax preparation company has already decided not to offer the loans anymore because of the policy change. Other companies will continue extending the loans but may withhold some of the refund to reduce their risk.

The best way to get your tax refund faster without having to pay the high fees and interest rates associated with refund anticipation loans is to:

• File sooner. Don’t wait until April, when tax preparers and the IRS are more likely to become backlogged.
• File electronically. Taxpayers who e-file get refunds in half the time as those who file a paper return.
• Have your refund deposited directly into your checking or savings account, and get it in as little as 10 days.

Learn more at the Consumer Financial Protection Bureau website.