Should You Apply for a Tax Refund Advance?

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If you expect money back from the IRS this tax season and you're looking for a fast way to get cash, a tax refund advance could work for you. Just be aware of how they work to avoid unexpected costs.

Four major tax-prep companies—storefront preparers H&R Block, Jackson-Hewitt and Liberty Tax; plus the do-it-yourself service TurboTax—are offering tax refund advances, essentially loans based on your expected federal refund. TaxSlayer, another online DIY service, will be rolling out its version later this month, a spokesperson says.

You can find tax refund advances of up to $3,500 that are free of fees and interest. You also can get bigger advances, up to $7,000, but you will pay a hefty interest of more than 35 percent for those larger loans.

To get an advance, you must provide enough information on last year's income to prepare your return. At Jackson Hewitt, you can even get a tax refund advance of up to $400 before your W-2 arrives as long as you can show a pay stub or another valid proof of income, a spokesperson says.

Taxpayers who take a tax refund advance typically get a portion of their owed refund within 24 to 48 hours of applying for it, the companies say. Consumers can apply now, without waiting until Jan. 28 when the filing season starts. (Early-bird taxpayers who don't take a refund advance and file electronically on Jan. 28 can expect their full IRS refunds by mid-to-late February. Tax refunds will go out as usual, the partial government shutdown notwithstanding, the IRS says.)

How Tax Refund Advances Work

You may want to hustle if a tax refund advance interests you. Most of the companies offering this product have a mid- or late-February application deadline. TurboTax says its Feb. 15 offer deadline is subject to change but didn't offer details.

And before you take advantage of these products, make sure you understand how they work and what to watch out for. 

For instance, the amount of the advance you can get depends on which tax preparer you use and how big a refund you're expecting, among other factors. H&R Block is offering advances of up to $3,000 per federal tax return. Jackson Hewitt will offer up to $7,000, and Liberty Tax offers as much as $6,250. TurboTax is offering advances of up to $1,000 per federal return, and TaxSlayer says it will offer the same. 

The main requirement in all cases is that you must get your taxes done by the company offering the refund advance. To apply for an advance from the big three storefront companies, you’ll need to go to the tax preparer’s office. With TaxSlayer and TurboTax, which have no brick-and-mortar presence, you handle the application process online.

The tax-prep companies themselves don't lend you the money. A bank that works with the tax company lends you the money, which is usually loaded onto a new prepaid card. When you receive your tax refund, the advance amount is automatically deducted from your refund and funneled to that bank, effectively paying back your loan for you. The remainder of your refund is usually loaded onto the prepaid card.

Some of the tax refund advances—notably Jackson Hewitt's Go Big Refund Advance and higher-sum Easy Advances from Liberty Tax—do charge interest, up to nearly 36 percent. And while the time period during which you'll pay that interest is likely to be short—just until your refund comes—it still means you'll owe more to the company than you borrowed. Jackson Hewitt says it won't charge interest for longer than 45 days, and notes that most clients get their refund and can pay back their loans within 24 days. But even a 24-day Go Big Refund Advance would cost $47.21 on a $2,000 loan, the company acknowledges.

The tax-prep companies told us you're not on the hook if your refund turns out to be less than the advance you received. You won’t need to pay them back the difference. 

"If the client’s tax refunds do not issue or are insufficient to fully repay the loan, the client is not generally obligated to pay the difference," an H&R Block spokesman told Consumer Reports by e-mail. "There are certain exceptions, such as cases of fraud."

Questions to Consider

If an advance sounds like something you would want, ask yourself:

Is an advance worthwhile for me? That depends on your situation, says Bruce McClary, spokesman for the National Foundation for Credit Counseling (NFCC), based in Washington, D.C.

If you're in bind—say, finding it hard to pay debts while on federal government furlough—these products, even with interest, might serve you better than racking up interest and fines for not paying other debts, he says.

"An advance could help someone avoid severe financial setbacks," McClary says. "But I would caution consumers to scrutinize those high-interest products very closely."

Do I qualify for an advance? If you don’t expect a refund from the IRS, you shouldn’t apply. And some situations may disqualify you. "If the taxpayer owes governmental debt or student loan debt, they may be subject to an IRS offset," says a Liberty Tax spokeswoman. That offset—an amount the IRS subtracts from your refund—may not leave you with enough to pay back the advance, she says.

In that case, you'd pay for tax prep but then find yourself ineligible for the loan. The companies require you to complete and file your return—and pay for their tax-prep services—before you apply for the advance. 

Will the tax preparer pitch me other services? It's possible. A storefront tax preparer dealing with you face-to-face could use the opportunity to try to sell you an add-on, says Adam Rust, director of WiseWage, a Durham, N.C., not-for-profit that helps workers who don't have traditional bank accounts set up direct-deposit accounts.

You might be encouraged, for instance, to take a so-called refund transfer, ostensibly to help you avoid having to pay your tax-prep fees up front. With this option, your refund, when it's issued, is automatically deposited into a dedicated account, where the tax-prep company takes out the refund advance and fees that you owe. At H&R Block, you'll pay an extra $39.95 for this service.

Are there any additional costs? Tax preparers could charge you more for their service than doing your taxes yourself using tax software, which can be low-cost or free. And you might pay nothing if you opt for a free, not-for-profit tax-prep concern such as the AARP Tax-Aide or the IRS’s Vita service. (IRS FreeFile allows anyone with 2018 adjusted gross income of $66,000 or less to use its tax software to prepare and file federal returns at no cost.) 

You might also pay to access your refund, because some of the offers require you to put the advance on a prepaid debit card. Those cards can have fees—$3 to make an ATM withdrawal or $4.95 to reload more cash [PDF], for instance—and they can add up. 

"It's important to know up front what fees might be assessed," says Suzanne Martindale, Consumer Reports' senior policy counsel. The additional costs could erode your refund bit by bit, she explains.

Here’s how the five services, shown here in alphabetical order, compare:

H&R Block Refund Advance

Deadline to apply: Feb. 28 at participating locations.

Amount of the advance: You can apply for an advance of $500, $750, $1,250, or $3,000, depending on your eligibility.

How it works: After your return has been prepared and electronically filed at an H&R Block location, you can apply for the advance. You’re notified of the decision typically within hours after applying. Funds will be loaded onto an H&R Block Emerald Prepaid Mastercard.

Prepaid card details: H&R Block Emerald Prepaid Mastercard has a variety of fees, including $3 per ATM withdrawal. (Emerald cardholders can use the card without triggering fees.) The Emerald Card allows a one-time, no-fee transfer of funds from your card account by check or automated clearinghouse (ACH) transfer.

Jackson Hewitt's Refund Advance Programs

The tax-prep company offers three types of refund advance products:

Jackson Hewitt No Fee Refund Advance

Deadline to apply: Jan. 20

Amount of the advance: From $200 to $400, provided you also plan to apply for a Jackson Hewitt No Fee Refund Advance Loan or Go Big Refund Advance Loan (see below).  

How it works: Apply on the Jackson Hewitt website to see whether you prequalify. Then go to a storefront office to have your taxes prepared. If you come in with a pay stub, this first advance—$200 to $400—can be loaded onto an American Express Serve prepaid card within minutes to 24 hours. If you choose to have the advance direct deposited into your bank account, expect the advance within one to three days of filing.

Prepaid card details: American Express Serve card has a variety of fees but can be used free at 24,000 MoneyPass ATMs.

Jackson Hewitt No Fee Refund Advance

Deadline to apply: Feb. 24

Amount of the advance: You can apply for an advance of $200, $500, $750, $1,000, $1,500 or $3,500.

How it works: Apply on the Jackson Hewitt website to see whether you prequalify. Then go to a storefront office to have your taxes prepared. If you select to receive the refund advance on an American Express Serve Card, you will get the loan amount within minutes to 24 hours. If you choose to have the advance direct deposited into your bank account, it’ll take one to five business days after you file.

Prepaid card details: American Express Serve card has a variety of fees but can be used free at 24,000 MoneyPass ATMs.

Jackson Hewitt Go Big Refund Advance

Deadline to apply: Feb. 3

Amount of the advance: You can apply for an advance of $1,000, $1,500, $2,000, $3,000, $4,500, $5,000, $6,000, or $7,000, depending on your eligibility.

How it works. Similar to the No Fee Refund Advance. However, interest of 35.9 percent applies.

Prepaid card details: Similar to No Fee Refund Advance.

Liberty Tax Easy Advance

Deadline to apply: Feb. 28 at participating locations.

Amount of the advance: In loan amounts of $500, $800, 1,300 $2,500, $3,000, $4,750 and $6,250, depending on your eligibility. A finance charge as high as 35.77 percent is charged on Easy Advances of $2,500 or more. 

How it works: Have your tax return prepared at a Liberty Tax location. Your advance will arrive within 24 hours after your return has been accepted by the IRS (or 24 hours after filing, if you file before the tax season starts). Funds can be loaded onto a NetSpend Liberty Tax Prepaid Mastercard or direct deposited into an existing account.

Prepaid card details: NetSpend Liberty Tax Prepaid Mastercard has a variety of fees, including $2.50 per ATM withdrawal.

TaxSlayer's Refund Advance

Deadline to apply: Available mid-January. There is no specific deadline for the program's end. 

Amount of the advance: You can apply for an advance of $500 or $1,000. You must use TaxSlayer Classic, Premium, or Ultimate for tax preparation, among other eligibility requirements. You also can't be a Vermont resident. The advance amount and your overall eligibility will be determined when you apply based on underwriting criteria by MetaBank, which is backing the loans. 

How it works: Apply for TaxSlayer's Refund Advance online when you complete and electronically file your return with TaxSlayer. Once the IRS accepts your return, it generally takes 24 hours to get approved for the loan. The refund advance is then loaded onto a new TaxSlayer Prepaid Visa Card. (TaxSlayer says it applies for that card for you, sending your personal information—including Social Security number—to Green Dot Bank, the card issuer.)

Prepaid card details: The TaxSlayer Prepaid Visa card has a variety of fees.

TurboTax Refund Advance

Deadline to apply: Feb. 15; date is subject to change.

Amount of the advance: You can apply for an advance of $250, $500, $750 to $1,000. Your expected refund must be at least $1,000. Among other eligibility requirements, you can't live in or file a return in Illinois, North Carolina, or Vermont.

How it works: Apply for the Refund Advance after completing your taxes with TurboTax. If you're approved for the advance, it will be loaded onto a virtual Turbo Prepaid Visa card within 48 hours of the IRS accepting your electronically filed return. An email will explain how to set up the virtual card; you then can use it online wherever it's accepted. A physical card typically arrives within 5 to 10 business days.

Prepaid card details: The Turbo Prepaid Visa card has out-of-network ATM withdrawal fees and retailer reload fees.

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