Some companies advertise “fast refunds” during tax season. These offers are actually expensive loans. Learn what you need to know about refund anticipation loans and other expensive refund services.
A refund anticipation loan (RAL) is money that you borrow. When you get your tax refund, you must return the money. RALs charge high fees, so you are paying to get your own money a little faster.
What you should know before taking out a RAL
The downsides of RALs include:
- High fees. The costs (fees plus interest) could be bigger than your refund. Therefore, if you get a RAL, you may lose money.
- You are taking on risk. You must pay back the loan, even if your refund is smaller than you expected. If you can't pay back the loan, your credit score may drop.
There are some other “fast refund” services that have similar downsides:
- Refund anticipation checks and transfers. Some tax preparers and banks charge a high fee to open a temporary bank account to receive directly deposited tax refunds.
- Instant refunds from car dealers and stores. Some car dealers offer “instant” tax refunds. Actually, the dealers get you a RAL, and you pay high fees.
Getting your refund faster
If you need your refund quickly, there are some steps you can take other than RALs:
- Open a savings account. To receive your refund faster, schedule direct deposit of your refund into a savings account. Learn more about opening a bank account from the FDIC.
- Request an expedited refund. If you experience an economic hardship or an IRS processing delay, the IRS maybe able to send your refund faster. To request an expedited refund, call the IRS at (800) 829-1040. Explain your situation. Ask for an “expedited manual refund.”
- Contact the Taxpayer Advocate. If you need your refund quickly due to economic hardship, call the Taxpayer Advocate Service at (877) 777-4778.
- If you have urgent bills, you should ask the senders for more time.
Free tax-filing resources
Most people with low or moderate income can do their taxes for free using FreeFile’s brand-name software or fillable forms.
To do your taxes for free:
- Visit IRS.gov/freefile. It’s available 24/7.
- Choose an option. Use the online lookup tool or browse all offers to find a good match.
- Leave the IRS site. On an IRS partner’s website, begin your return safely and securely.
Also, you may qualify for free tax help from:
- VITA. If you have low income, disability or limited English skills, you may qualify for free tax help from the Volunteer Income Tax Assistance (VITA) program.
- TCE. If you are at least 60 years old, you can receive free tax help from Tax Counseling for the Elderly (TCE).
To find the nearest VITA site near you, use the VITA locator tool or call (800) 906-9887. VITA services may vary by location. Please check with your local VITA site to find out what options are available.