people would jump at the chance to speed up getting some
of their tax refund cash, especially in light of the
government shutdown, job cuts and other financial
Tiffany Vernier’s story should make some who are
desperate to pay their bills think twice about handing
over a few hundred dollars to get their taxes done in
the hopes of snagging a tax refund advance of up to
bombarded with TV ads, window signs and other pitches
for a loan product that some consumers might not even
consider a real loan. Isn’t this tax advance just a
way to get some of your own refund money a few weeks
early? Not exactly.
tax refund advance loans may be popular and work OK for
some people, they’re not always a fast-cash guarantee
— especially if you have a bad credit score.
of people are going for this refund advance because you
can’t get a standard loan,” said Vernier, 38, who
admits her credit score of around 530 needs work.
found out too late that she couldn’t qualify for a tax
refund advance, either.
is worth telling because it’s easy to gloss over the
details in a rush for cash.
families feel the pressure of too many bills smacking up
against too little cash — including the 800,000
federal workers across the country who soon will miss
their second paycheck in the lengthy federal government
percent of Americans, for example, would be able to pay
an unexpected $1,000 expense from their savings,
according to a survey by Bankrate.com.
for tax refund advances grow
popularity of refund advance products has grown in
recent years, in part, because the Internal Revenue
Service is now required under law to delay the entire
refund of early tax filers who claim the Earned Income
Tax Credit or the Additional Child Tax Credit until at
least mid-February. The delay was designed to combat tax
waiting the extra weeks can be a hardship for many
cash-strapped, working families. Thanks to the Earned
Income Tax Credit, their tax refund is the single
largest lump sum payment they get in a year.
year, roughly 15 million taxpayers claiming those two
credits had to wait until the week of Feb. 27 to get
their refund from the IRS, according to H&R Block.
million refund anticipation loans were made in the
industry in 2017, according to a report issued in March
2018 by the National Consumer Law Center.
a mother of two children under 4, had her taxes done on
Jan. 16 in the hopes of qualifying for one of the
heavily advertised tax refund advances. She wanted some
quick relief to catch up with car payments and other
partner is out of work,” Vernier said, noting that he
has had health issues.
on one income. We’re struggling right now, as I’m
sure a lot of people are,” Vernier said. “It’s
just been me with the equivalent of making $12 an
a freelancer who specializes in technical writing and
drafting proposals, reported nearly $27,000 in income on
her 2018 tax return.
thought she’d be able to receive some type of refund
vary in amounts: $500, $750, $1,250 or $3,000. The
amount of the advance depends, in part, on the expected
amount of your refund.
some advance money becomes available the same day you
file your taxes, even though the IRS won’t being
accepting returns until Jan. 28.
my credit score wasn’t going to be high enough for a
standard loan,” Vernier said.
said she was told by the tax preparers that she likely
would qualify, given that she was expected to receive
more than $7,800 in federal and state tax refunds with
the earned income credit and the child credit.
refund will be reduced $327.95 (after a $25 coupon) for
the cost of getting her taxes done at an H&R Block
office near her home in Timberville, Va., in the
Shenandoah Valley. The fees include a $39.95 charge for
a federal refund transfer, a processing fee associated
with paying tax prep fees out of your refund and
avoiding out of pocket costs.
had her taxes completed, she waited for a text to show
the exact amount of her refund advance, which could
she said she had to call the 800 number later to find
out that she didn’t qualify for anything.
that, she’s waiting until at least mid-February to get
her refund and she’ll get a somewhat smaller refund
because the tax prep fees will be taken out. Fees she
might have avoided otherwise.
she was blindsided.
confused by some terms
tax preparers do not call it a loan,” Vernier claimed.
“They assured me it was not credit-based.”
some of the fine print is “deliberately vague.”
the criteria for approval is explained as such: “You
first must meet certain eligibility requirements such as
having a sufficient tax refund from the IRS, and provide
appropriate identification. You then submit an
application to Axos Bank, the lender. The bank will
evaluate your application based on standard underwriting
criteria and makes the decision to approve or deny your
takes issue with using words like “underwriting
criteria,” as well.
understand credit checks,” she said. “People don’t
refund advance, though, means you’re taking on a loan
made by a bank.
is a loan,” said Chi Chi Wu, staff attorney at the
National Consumer Law Center in Boston.
you apply for a loan, a lender automatically has the
right to check your credit report and your credit
consumers must understand with the refund advance loans
is that you’re not actually getting your tax refund
faster. You’re getting a loan that reflects a portion
of your refund.
Block said it is focused on being upfront.
is important to H&R Block,” said H&R Block
spokesperson Susan Waldron.
why we’re providing tax prep prices before the tax
professional starts a return and the terms for Refund
Advance are also disclosed to the client,” she said.
told me the bank may review the client’s credit report
as part of the application for the loan.
client is informed of this and agrees to it as part of
the loan application,” she said.
said the approval rates for the H&R Block Refund
Advance is more than 75 percent.
everyone would receive a refund advance loan.
client is also told that the bank will make a decision
on the loan application based on the bank’s
underwriting standards and there is no guarantee of
approval,” Waldron said.
regret this client was not happy with her experience,
but we can’t change the bank’s decision on the
who reached out to me to tell her story, said she’s
concerned that others could fall into this trap because
she maintains the credit-check aspect of the loan was
not spelled out to her. She’s concerned that other
consumers could easily be confused, too.
and rules can vary
Block has been heavily advertising its refund advance of
up to $3,000. It’s a no-interest loan from Axos Bank
and offered to customers who file their taxes at H&R
Block from Jan. 4 through Feb. 28 at participating
prep firms offer some type of refund advance loans, too.
Hewitt Tax Service has a “No Fee Refund Advance
Loan” that is available in amounts up to $3,500.
$1,000 advance is available to qualified new clients
from Jan. 2 through Jan. 27. So new clients could get
between $200 and $4,500, subject to eligibility,
approval and factors including the size of the tax
refund. The loan is offered by MetaBank. The fine print
reads: “Availability subject to identity verification,
eligibility criteria, and underwriting standards.”
TaxSlayer website proclaims: “Skip the wait with a
refund advance from TaxSlayer and you could get up to
$1,000 in as little as 24 hours.”
TaxSlayer site also notes: “If your application is
approved, the loan amount ($500 or $1,000) will be
subtracted from the total federal refund amount issued
by the IRS. In other words, the loan amount will reduce
any federal tax refund amount you get later.”
Tax just announced that it was expanding its Easy
Advance program to offer furloughed federal government
workers or those working without pay pre-approved access
to an immediate tax refund advance of $500 with no
interest or fees, if they have an expected tax refund of
at least $1,001.
minimum advance of $500 would be offered without the
normal loan approval process to the federal government
employees hurt by the shutdown. The Liberty refund
advance loan is secured by and paid back with your tax
refund and offered by Republic Bank & Trust.
amounts higher than the pre-approved $500, the
taxpayer’s tax return data, expected federal refund,
previous history with the transmitter and credit bureau
will be evaluated to determine the likelihood that it
will be funded by the IRS,” according to Brian
Ashcraft, a spokesperson for Liberty Tax.
credit bureau check is considered a ‘soft check’ and
does not affect the taxpayer’s credit score,” he
is repaid from the client’s tax refunds. If approved,
clients will typically have access to the loan amount
within hours of applying.
the promotions highlight that the refund advances have
no fees and charge zero percent in interest. But again,
you do have to pay for tax preparation services, which
can add up depending on your tax situation.
past, consumer watchdog groups indicated that some lower
and moderate-income taxpayers who qualify for the Earned
Income Tax Credit faced tax preparation fees of $400 or
more in some cases.
qualify for the Earned Income Tax Credit are eligible
for free tax preparation at volunteer sites, such as the
Accounting Aid Society, which will open its metro
Detroit offices Jan. 26.
and individuals with incomes up to $55,000 may be
eligible for the Accounting Aid Society’s full service
tax help. If so, the service offers to prepare and file
your federal, state and local income tax returns, and to
ensure you receive all of your federal and state Earned
Income Tax Credits.
— who has prepared her own taxes in the past — said
she wouldn’t have paid all that money to wait a month
or more for a refund. Instead, she said she would have
used tax software to do the tax return herself and
skipped the $327.95 in fees.
taxes, she said, aren’t that complicated.
the standard deduction across the board,” she