Tax refund advances come from tax preparation companies and some banks, not from the IRS
The IRS does not offer refund advances. Instead, tax preparation firms like H&R Block, Jackson Hewitt, and Liberty Tax Service offer them as a service to their clients. Some banks and credit unions also offer refund advances, though the terms and availability vary widely. These companies lend you money against your expected tax refund, and the refund itself pays back the loan when it arrives.
The key difference is timing: you get cash in days instead of waiting for the IRS to process your return and send your refund. The cost is a fee charged by the lender, which can range from $0 to several hundred dollars depending on the company and the loan size. Some companies advertise "free" advances but charge fees for other services bundled into the product.
Key Takeaways
- Tax preparation companies like H&R Block, Jackson Hewitt, and Liberty Tax Service are the primary sources of refund advances, not government agencies.
- Banks and credit unions sometimes offer refund advances, but availability depends on whether you bank with them and meet their specific requirements.
- Fees for refund advances typically range from $0 to several hundred dollars and are charged by the lender, not the IRS.
- The loan is repaid directly from your tax refund when the IRS deposits it, so you do not receive the full refund amount in your bank account.
Tax preparation companies and their refund advance products
H&R Block offers a product called the Refund Advance, available to clients who prepare their taxes through the company. The advance is typically available within one business day of filing, and the amount depends on your expected refund. H&R Block charges a fee for this service, which varies by location and current promotions.
Jackson Hewitt offers Rapid Refund advances to its tax preparation clients. Like H&R Block, the advance is available quickly after filing, and fees explore. Liberty Tax Service has similar products under different names depending on the year and location.
These companies benefit from offering advances because they already have your tax information and can estimate your refund with reasonable accuracy. They also know that you will file with them, so the repayment is nearly certain. However, you must prepare your taxes with them to access their refund advance product — you cannot use a competitor's advance if you file elsewhere.
Banks and credit unions offering refund advances
Some banks and credit unions offer refund advances to their account holders, though this is less common than it was ten years ago. The availability and terms depend entirely on your financial institution. A few larger banks have offered these products in the past, but many have discontinued them or limited them to specific account types.
If your bank offers a refund advance, you will typically need to have direct deposit set up with them and meet minimum account balance or credit requirements. The process usually involves filing your taxes electronically and authorizing the bank to receive your refund information from the IRS. Fees and loan amounts vary by institution.
The best way to learn about your bank offers this product is to call their customer service line or visit a branch in person. Online searches for "[Your Bank Name] refund advance" may return outdated information, so direct contact is more reliable.
Online lenders and fintech companies
Some online lenders and fintech companies advertise refund advances or "tax refund loans," but these are riskier than products from established tax preparation companies or banks. These lenders often charge higher fees, require more personal information, and may have less transparent terms. Some operate in only certain states due to lending regulations.
If you are considering an online lender, verify that they are licensed to operate in your state and read the full terms and conditions before proceeding. Check whether the fee is a flat amount or a percentage of the loan, and confirm exactly when and how the repayment will occur. The Federal Trade Commission has warned consumers about predatory refund advance lenders, so caution is warranted.
What happens to your refund after you take an advance
When you take a refund advance, the lender typically has the right to receive your tax refund directly from the IRS. This is called a refund offset or refund intercept. The IRS sends the refund to the lender's account, the lender deducts the loan amount plus fees, and any remaining balance is sent to you.
This means you do not receive your full refund in your bank account. If your refund is $2,000 and the advance loan plus fees totals $500, you will receive $1,500. The lender keeps the $500 to cover the advance and its costs. This is why it is important to understand the total fee before you accept the loan.
If your actual refund turns out to be smaller than expected, you may owe the lender money. For example, if you expected a $2,000 refund but only received $1,500, and the advance was $1,200, the lender would take the full $1,500 and you would still owe $200. Some lenders will pursue this debt through collection agencies or small claims court.
Comparing refund advances to other ways to get money quickly
Before taking a refund advance, consider whether other options might cost less. A personal loan from a bank or credit union, a credit card cash advance, or even a payday loan might have lower total costs depending on the amounts involved and your credit situation. A personal loan from a credit union, for instance, might charge 8 to 12 percent annual interest, which could be cheaper than a $300 refund advance fee on a $2,000 loan.
You can also straightforward file your taxes electronically and request direct deposit, which the IRS will process within 21 days at no cost. If you can wait three weeks, this is always the cheapest option. The advance makes sense only if you need the money urgently and the fee is acceptable to you.
Red flags and what to avoid
Avoid any company that guarantees a refund or promises a specific amount without seeing your tax documents. The IRS calculates your refund based on your actual income, deductions, and withholdings, and no one can know the exact amount until your return is filed and processed.
Be cautious of lenders who require upfront payment before providing the advance, or who ask for access to your bank account beyond what is needed to receive the refund. Legitimate refund advance lenders do not need your online banking password or Social Security number beyond what is standard for tax filing.
If a company claims to be affiliated with the IRS or uses official-sounding language like "IRS-approved" or "government-backed," that is a warning sign. The IRS does not approve or endorse refund advance products.
Frequently Asked Questions
Can I get a refund advance if I file my taxes myself online?
It depends on where you file. If you use tax software from a company that offers refund advances (like H&R Block's online platform), you may be able to access their advance product. If you file through a free IRS-approved software provider, refund advances are typically not available. You would need to use a tax preparation company or bank that offers the product.
What if the IRS rejects my return or asks for more information?
If the IRS rejects your return after you have taken a refund advance, the lender will not receive the refund they expected. You will likely be responsible for repaying the advance loan in full, even though you did not receive the refund. This is why it is important to file accurately and keep copies of all documents you submitted.
Do I have to take a refund advance if I prepare my taxes with H&R Block or another company?
No. Refund advances are optional services. You can prepare your taxes with any company and choose not to take an advance. You will receive your full refund through direct deposit or check from the IRS instead, which takes longer but costs nothing.
Can I take a refund advance from multiple lenders?
Technically you could attempt this, but it is not advisable. The IRS will only send your refund to one account. If multiple lenders have claims on your refund, disputes will arise, and you could end up owing money to more than one company. Most lenders require you to sign an agreement stating that you are not taking advances from other sources.
What if I owe back taxes or child support?
The IRS can intercept your refund to pay back taxes, child support, or other federal debts before it reaches the lender. If this happens, the lender will receive less than expected and may pursue you for the shortfall. Disclose any known debts to the lender before taking an advance so you understand the risk.