A tax advance is a loan based on your expected tax refund. It allows you to receive part of your refund early, often within days of applying. These advances are typically offered by tax preparation services during tax season.
When you file your taxes, the IRS processes your return and issues your refund. A tax advance skips this wait time. Instead, a lender provides you with a portion of your expected refund upfront. Once the IRS issues your actual refund, it goes to the lender to repay the advance.
For example, if you expect a $3,000 refund and take a $1,500 tax advance, you'll receive $1,500 immediately. When the IRS sends your $3,000 refund, the lender keeps $1,500 and forwards the remaining $1,500 to you.
| Type | Description | Typical Fees |
|---|---|---|
| Refund Advance Loan | A short-term loan from a bank or financial institution, often offered through tax preparation software. | $0-$60, depending on the lender and amount borrowed. |
| Early Refund | Some tax preparers offer early refunds as a service, often with no interest but possible fees. | $0-$30, sometimes waived with certain products or services. |
| Refund Transfer | A service where fees for tax preparation are deducted from your refund, and the rest is sent to you. | $30-$60, depending on the preparer. |
Most tax preparation services offering advances have minimal requirements. You generally need:
Unlike traditional loans, tax advances don't require a credit check. However, some lenders may verify your income or tax history.
Many people confuse tax advances with other financial products. Here are a few key distinctions:
To get a tax advance, follow these steps:
Once your refund is issued by the IRS, the lender deducts the advance amount plus any fees, and you receive the remaining balance.
If you don't qualify for a tax advance or prefer alternatives, consider these options:
While tax advances can provide quick cash, they're not always the best option. Weigh the fees and interest against the convenience before deciding.