Tax Refund Loans: Where to Get an Advance in 2020?
Meeting the April 15 tax filing deadline can be like being in a horror story for most taxpayers. Once it passes, assuming you filed your return, the next step in the tax process can actually be a positive one. Why? The next step usually involves getting a tax refund! Due to the busy schedules and a lot of paperwork as well as supporting documents that accompany a certain tax return, it is not surprising for an individual or a company to overpay the IRS with taxes. But what do we do in this situation? Of course, we shouldn't let them go away with our hard-earned money. We should do all we can to recover what we have paid in excess. It's a good thing that the IRS offers several methods to get the excess payment thorough a refund. The problem, however, is that this may take some time to be approved. The good thing is that there are different institutions that offer ways to make the process a lot easier. One is through tax refund advance loans.
Tax refund advance loans are filed either by the taxpayer himself or through a professional tax assessor who has experience with the same transactions. It is important to note however that one must only endeavor to file this loan by himself if he is confident about completing the papers and being able to justify the claim. In this case, the advantage is that the taxpayer gets to save the money that is supposed to be paid to the assessor. Having an agent do the job, on the other hand, lessens the anticipation about the loan being approved or not.
Either way, the tax refund advance loan will require a lot of papers and undergo a complicated process. There are however ways to facilitate and speed things up. The main step is to immediately report to the IRS the overpayment as soon as you discover them. The office sets a prescriptive period for the filing of the claim so you better make sure that you get through that period. Next, have the overpayment computed by an authorized officer. You can also do the computation yourself with the aid of software that has been developed so that you know if it is still worth all the time and effort that you will have to spend on it.
Next, use the computation as the basis of your succeeding transactions. If you are unsure about something, you should come to the local tax collection officer nearby for concrete instructions. He is also the one knowledgeable about the changes in the rules as well as the latest issuances concerning your claim. It may also help for you to ask for certifications and recommendations from this officer so that the institution where you will be filing the tax refund will not have any more reason to doubt the approval of your application. Once you have complied with all the needed steps and papers, the next thing that you should do is to continuously follow up with the office on the progress of your claim. You have to remember that a lot of similar tax refund advance claims might be submitted there and if you don't take the time to check on it, the documents might just be ignored and you will be waiting all in vain.
The first thing to understand about your tax refund is the relevance of its size. A big tax refund is a good thing, right? The honest answer is that a big tax refund is actually a very bad thing. How can that be? Well, think it through. A big tax refund usually means that you paid too much tax during the year. Although you are getting it back at the end of the year, you effectively have given the government an interest-free loan for the entire year. That is one heck of a deal for the government. It's not particularly a good deal for you. If you find that you're getting a large refund every year, you should analyze how much you are paying in and make adjustments accordingly.
The second thing to understand about tax refunds is that there are different options for getting a refund. The first option is the classic refund by check in the mail. The problem with this option is the "check is in the mail!" In short, it takes a lot of time to get the actual check. How much time? It can take 2 to 3 months. The second option which the IRS only implemented in the last few years is to get a direct deposit. With this option, the IRS will actually deposit the check into your bank account. The beauty of this approach is that you usually get a refund within three weeks. That is obviously much faster than the mailed check approach.
One thing most taxpayers will be very surprised to learn is the IRS actually has an excellent website. Once you file your tax return, you may want to find out the status of your tax refund. By entering basic information such as your name, social security number and some minor information off your tax return, the IRS will give you a real-time status of your tax refund. All in all, it's pretty cool. Paying taxes is no fun for anyone. That being said, getting a refund isn't exactly the worst thing in the world. Just make sure you're giving the government a free loan! Critics for years have attacked loans for being unscrupulous and predatory. But these loans also work as prepayment for tax refunds.
Most income tax refund advance loans are provided by the companies who also prepare the returns, including H&R Block, Jackson Hewitt, and Liberty. They have small or temporary offices set up in low-income areas filled with working-class people who do not understand that what they receive is a loan, not their actual refund.
The risk lies in the possibility that the refund may not come through as hoped from the Internal Revenue Service. The borrower is obligated to repay this loan regardless of what happens when the IRS receives and reviews the paperwork. The lender is also going to charge the borrower with interest and fees for the loan whether or not IRS accepts it.
The tax filer needs to understand that the tax preparers do not have the final say on the validity of the return. The preparer only fills out the forms and submits them on behalf of the filer. Only the IRS has the authority to determine the filing is acceptable and then process it.
The approval by IRS happens after an agency official reviews the return and determines that it is accurate, complete and includes required documentation. The review process takes several days to several weeks depending on whether the return was filed electronically or by mail.
Lenders have no problem with this risk because the odds of getting their loaned money back are excellent. The Internal Revenue Service approves virtually all returns within a week of its submission. Even if a few returns end up being rejected, the amount of income earned on the huge majority that does pass the IRS inspection justifies the relatively few losses on return rejections.
Some critics are stating that some people are assuming that they are getting their refunds quicker, but they do not realize that they are in fact paying more to get their refund only a couple weeks earlier than normal. The IRS allows banks to use a financial instrument called a debt indicator, which many people allow the IRS to act as enablers of these types of loans. This tool would let banks know if the individual who was filing their tax return be getting the whole return, or if part of it was being taken out by child support, defaulted student loans, back taxes, or any other unpaid debts.
However, without these debt indicators, banks will not know if they will recover their loan or not. Because of this, banks might be handling a great risk in giving out tax advance loans. A small number of banks only are giving out these loans in the country.
Tax preparation offices normally process tax refunds. This move by the IRS was slammed by tax preparation offices because they believe the use of debt indicators will not stop these loans, but the lending risk will increase and make banks increase the fees for giving tax advance loans.
The tax preparation company H&R Block said that refund anticipation loans are a big need in communities that are low income. People in poorer communities generally live from paycheck to paycheck while juggling debt. Another tax preparation group, Jackson Hewitt Tax Service, stated that refund anticipation loans are important and needed in economic downturns.