If your tax professional suggests a tax refund product, such as a refund advance loan or anticipatory check, experts advise reading the fine print first.
That's because nearly 16% of U.S. taxpayers paid more than $842 million in fees to receive their 2023 refunds. Of these, about 96% used Refund Anticipation Checks (RACs), Treasury Department tax inspectors estimate. report last week. A further 4% took out Refund Expected Loans (RAL).
These products are attractive to taxpayers who want a refund and don't want to wait days or weeks for the IRS to deposit money into their account or cut a check. The agency also said that seven tax return preparation companies, which account for nearly 80% of all refund products, “while generally complying with the applicable guidance, did not make all the information clearly available to consumers.” After researching the website,
“In some cases, fees and costing information for these products were not clearly advertised, requiring reading the fine print or digging through multiple pages to find costing information.”
Advance tax refund loan and check fees
RAC fees for the 2024 filing season will range from $25 to $55, according to the report. The average refund for these taxpayers is $3,841, indicating that the cost of the RAC is approximately 1% of the total refund. The average refund for paid RAL was $6,696.
Refunds may be made to prepaid cards, and associated fees can vary widely, and out-of-network ATMs often charge a fee. Note Consumer Financial Protection Bureau.
Additionally, many taxpayers are eligible for free assistance from preparers certified by the IRS.
“Many taxpayers will receive their refund from the IRS within 10 to 21 days,” the CFPB advises. “You can save money by waiting a week or two.”
Here's how to find volunteers in your community or online.
- Visit irs.gov and search for “Free Tax Return Preparation.”
- Visit AARP.org and search for “Tax-Aide Locator.”
- For online tax filing, visit GetYourRefund.org
- Visit MyFreeTaxes.com to prepare your tax return on your own with assistance
