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By Grass Weisbaum
For many Americans, this tax refund is their biggest cash gain of the year.
The electronic file and choose the direct deposit and you should get your refund in about 21 days, says the IRS. Some people can not wait so long; they have bills to pay – now.
Many low- and moderate-income taxpayers who claim the earned income tax credit or the child tax credit may not receive this money until the end of the month or the beginning of March.
A repayment advance from one of the leading tax preparation companies can provide you with some of that money as a refund in one or two days. These short-term loans, worth approximately $ 200 to $ 7,000, bridge the gap between the filing of your return and the reimbursement of your refund.
Consumer advocates have regularly criticized tax refund loans because of extremely high interest rates and high fees. But things change.
The big names in tax preparation – H & R Block, Jackson Hewitt, Liberty Tax – all offer tax refund advances at no cost or interest. (The TurboTax and TaxSlayer loan programs are now expired.)
"Today's tax refund advances are much better than previous products, but you have to be careful and read the fine print," said Tobie Stanger, editor of Consumer Reports, who recently analyzed the different advance tax refund offers.
With direct deposit from the IRS, your refund goes into your bank account. With a tax advance, a bank that works with the tax preparer lends you this money which is usually loaded on a prepaid card. (Jackson Hewitt offers direct deposit). This advance is automatically deducted from your refund to repay the loan, and the remaining balance is paid on your prepaid card.
"This prepaid card can be loaded with fees that drain the value of your refund," said Scott Astrada, director of federal advocacy at the Center for Responsible Lending. "These are the fees that are not readily apparent when you decide if you want an early repayment of the loan."
For example, with some of these prepaid cards, you will pay between $ 2.50 and $ 3 for each ATM withdrawal. There may also be monthly service fees. If you choose this route, be sure to know the fee structure – and whether it is possible to use the card for free at some ATMs.
Here is an overview of these free / zero interest offers still available.
H & R Block Refund Advance
- Advances: $ 500, $ 750, $ 1,250 or $ 3,000
- Deadline to apply: February 28
Jackson Hewitt Free Refund Advance
- Advances: $ 200, $ 500, $ 750, $ 1,000, $ 1,500 or $ 3,500
- Deadline to apply: February 24
Liberty Tax Easy Advance
- Advances: $ 500, $ 800, $ 1,300
- For advances between $ 2,500 and $ 6,250, financial expenses can reach 35.77%.
- Deadline to apply: February 28
YOU HAVE GOTTA PAID TO PLAY
Tax preparation companies offer advance loans with repayment because they attract people to the door.
"That's what our customers want," said Susan Waldron, director of communications at H & R Block. "Many people live on the paycheck and want to get their money fast. We can do it for them with this product without interest or fees. "
Keep in mind that to be able to "apply" the repayment advance loan, you need to have this company complete your tax return.
"You have to pay for the preparation of your tax, even if you have a very simple statement that would not require someone to prepare it," said Andrea Coombes, Tax Specialist on the NerdWallet Personal Finance website. . "So the preparation costs for this is really the cost of tax preparation."
Aside from H & R Block, which has launched a transparent pricing program this year, you will not know how much the tax preparation costs will be until the job is done. Even then, there is no guarantee that you will be eligible for the loan at the end of the process.
"These are in fact loans written, and if you can not qualify for a loan under normal circumstances, unlike many low-income taxpayers, then you will not be able to claim either," said Mandi Matlock, a a tax attorney who works for the National Consumer Law Center. "But by the time you realize it, you have already agreed to pay the tax preparation fees charged and you are stuck. If the loan application is denied, you can not go elsewhere to try to get this loan. "
H & R Block told NBC News BETTER that about 75% of people who apply benefit from the repayment advance. This means that one in four is denied.
You may be eligible to deposit your taxes for free
Many taxpayers are eligible for the preparation and production of free returns:
- The AARP Tax-Aide program offers individualized tax preparation and e-filing for those aged 50 and over with low to moderate incomes.
- The Volunteer Income Assistance Program (VITA) offers free tax assistance from IRS certified volunteers to people earning USD 55,000 or less, as well as to people with disabilities and whose the level of English is limited.
- Anyone whose adjusted gross income is less than or equal to 66,000 USD for 2018 can use the IRS Free File Program to prepare and archive your return for free.
TALK ABOUT REIMBURSEMENT – YOU COULD BE FOR AN UNSUITABLE SURPRISE
It's early in the tax season, but so far the average repayment ($ 1,996) is 9.2% lower than last year, according to the IRS. This is a surprise for many people.
"A lower tax refund does not mean you paid more taxes this year," said Greg McBride, Chief Financial Analyst at Bankrate.com. "Source retention tables have been adjusted. The reality is that you have received a large portion of this repayment dotted in 2018 in all your paychecks. "
The experts in personal finance all agree: smart financial planning is not too restrictive to get a large refund.
"Ideally, you do not want to get a large refund because it means you've made an interest-free loan to the government," McBride told NBC News BETTER. "You want to either get a small refund, or even pay a small amount and get your money throughout the year with each pay check."
Some people insist on getting a large refund because they see it as a self-imposed savings program. For those who feel so, at least make sure you use this refund.
"Use this windfall to pay down your debts, increase your savings or contribute to retirement," said McBride.
A better solution for those who do not have the discipline to save: adjust your payroll deductions to eliminate the big refund, then withdraw the extra money from each paycheck and automatically deposit it into your rainy day savings account .
MORE TAX ADVICE
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