How to get an early tax refund despite shutdown

Tax preparers are offering loans, many with no strings attached.

iStock / peanut8481

JACKSONVILLE, Fla. - The White House announced today that tax refunds will go out as usual, even if the partial government shutdown continues into the 2019 filing season, which begins in late January. That means early tax filers could begin to get refunds by mid-to-late February. 

But if you're directly or indirectly affected by the shutdown—or just want your refund quickly—you may want to get your funds even faster.

If that's you, a tax refund advance—really, a loan offered by a tax-prep company based on your expected refund—could be a reasonable option. A few are But you might want to hustle to get it.

Depending on the lender and the amount, you may be able to get a tax refund advance with no interest or fees. But before you take advantage of these products, make sure you understand how they work and what to watch out for.

How Tax Refund Advances Work

Three major storefront tax-preparation services—H&R Block, Jackson Hewitt and Liberty Tax—and the online tax-prep services TaxSlayer and TurboTax—are offering advances on your federal tax refund, with minimal strings attached.

This tax season you can get as much as $7,000 in advance, though above $2,500, you will be charged hefty interest—of nearly 36 percent.

The amount of the advance you can get depends on which tax preparer you use, and how big a refund you're expecting, among other factors. H&R Block is offering advances of up to $3,000 per federal tax return. Jackson Hewitt will offer up to $7,000, and Liberty Tax offers as much as $6,250. TaxSlayer and TurboTax, both online tax-prep services, are both offering advances of up to $1,000 per federal return. 

At Jackson Hewitt you can even get a tax refund advance of up to $400 before your W-2 arrives, as long as you can show a pay stub or another valid proof of income.

The main requirement in all cases is that you must get your taxes done by the company offering the refund advance. To apply for an advance from the big three storefront companies, you’ll need to go to the tax preparer’s office. With TaxSlayer and TurboTax, which have no brick-and-mortar presence, you handle the application process online.

The tax-prep companies themselves don't loan you the money. A bank that works with the tax company lends you the money, which typically is loaded onto a new prepaid card. When you receive your tax refund, the advance amount is directed back to that bank, effectively paying back your loan for you. In most cases, you can choose to get the remainder of your refund refund loaded onto the prepaid card or direct deposited.

If your refund turns out to be less than the advance you received, the companies say you won’t need to pay back the difference. “Jackson Hewitt covers that cost,” says Alan Ferber, the company’s CEO.

The timing of these offers is appealing to many people seeking immediate cash. In addition to the estimated, affected 800,000 federal workers, who will eventually get paid for their time working or furloughed during the shutdown, more than a million federal contract workers may not be getting paychecks at all. And more than 26 million taxpayers who claim the Earned-Income Tax Credit or the additional child tax credit don’t get their tax refunds until at least mid-February because of an IRS fraud-prevention process that will focuses on 2018 tax returns that claim those credits. Typically, such taxpayers file early to get their entire refunds. Last year the average refund was more than $2,800, according to the IRS

Questions to Consider

If an advance sounds like something you would want, ask yourself:

Do I qualify for an advance? If you don’t expect a refund from the IRS, you shouldn’t apply. Certain financial situations also could disqualify you from getting an advance, including an unpaid student loan or other debt with government, owing back child support, or an outstanding garnishment on your wages. This means there’s a risk that you’ll pay for tax prep but then find yourself ineligible for the loan. H&R Block and Liberty Tax require you to complete and file your return before you apply for the advance. 

Why would tax preparers offer me an advance? The answer is that they hope to also generate new business from you. “Those loans give the company the leverage to extract profits from consumers elsewhere,” says Adam Rust, director of WiseWage, a Durham, N.C., not-for-profit that helps “unbanked” workers set up direct-deposit accounts.

A tax preparer, for example might try to sell you an audit protection service, though the IRS reports that only about 1 percent of all individual tax returns are audited in a given year. 

Are there any hidden costs? Tax preparers could charge you more for their service than if you did your taxes yourself or used a free, not-for-profit tax-prep concern such as the AARP Tax-Aide or the IRS’ Vita service. IRS FreeFile allows anyone with 2017 adjusted gross income of $66,000 or less to use its tax software at no cost. Using tax software can be low-cost or free.

Some of the offers require you to put the advance on a prepaid debit card. Those cards can have fees.

Should I apply for an advance? If you think you’ll qualify, you can go ahead and apply for it. Just expect the company to try to sell you other services, or refer you to other companies selling services. Also keep in mind that when you get your tax advance, if it’s credited to a prepaid card there might be fees associated with using that card.

Here’s how the five services, shown here in alphabetical order, compare:

H&R Block Refund Advance

Deadline to apply: Feb. 28 at participating locations.

Amount of the advance: You can apply for an advance of $500, $750, $1,250, or $3,000, depending on your eligibility.

How it works: After your return has been prepared and electronically filed at an H&R Block location, you can apply for the advance. You’re notified of approval typically within 24 hours after applying. Funds will be loaded onto an H&R Block Emerald Prepaid Mastercard.

Prepaid card details: H&R Block Emerald Prepaid Mastercard has a variety of fees, including $3 per ATM withdrawal. (Emerald cardholders can use the card without triggering fees.) The Emerald Card allows a one-time, no-free transfer of funds from your card account by check or via automated clearinghouse (ACH) transfer.

Jackson Hewitt Early Refund Advance Loan

Deadline to apply: January 20

Amount of the advance: From $200 to $400; assuming you also plan to apply for   Jackson Hewitt No Fee Refund Advance Loan or Go Big Refund Advance Loan (see below).  

How it works: Apply on the Jackson Hewitt website to see if you prequalify. Then go to a storefront office to have your taxes prepared. If you come in with a pay stub, this first advance—$200 to $400—can be loaded onto an American Express Serve prepaid card within minutes to 24 hours. If you choose to have the advance direct deposited into your bank account, it’ll take one to three days after you file.

Prepaid card details: American Express Serve card has a variety of fees but can be used free at 24,000 MoneyPass ATMs.

Jackson Hewitt No Fee Refund Advance Loan

Deadline to apply: February 24

Amount of the advance: From $200 to $400; assuming you also plan to apply for   Jackson Hewitt No Fee Refund Advance Loan or Go Big Refund Advance Loan (see below).  

How it works: Apply on the Jackson Hewitt website to see if you prequalify. Then go to a storefront office to have your taxes prepared. If you come in with a pay stub, this first advance—$200 to $400—can be loaded onto an American Express Serve prepaid card within minutes to 24 hours. If you choose to have the advance direct deposited into your bank account, it’ll take one to three days after you file.

Prepaid card details: American Express Serve card has a variety of fees but can be used free at 24,000 MoneyPass ATMs.

Liberty Tax Easy Advance

Deadline to apply: Feb. 28 at participating locations.

Amount of the advance: In loan amounts of $500, $800, 1,300 $2,500, $3,000, $4,750 and $6,250, depending on your eligibility. A finance charge as high as 35.77 percent is charged on Easy Advances of $2,500 or more. For instance, if you take a $2,500 Easy Advance, you will need to repay $$2,563.70 once you get your refund from the IRS.

How it works: You need to have your tax return prepared at a Liberty Tax location. Your advance will arrive within 24 hours after it has been accepted by the IRS (or 24 hours after filing, if you file before the tax season starts). Funds can be loaded onto a NetSpend Liberty Tax Prepaid Mastercard or direct deposited.

Prepaid card details: NetSpend Liberty Tax Prepaid Mastercard has a variety of fees, including $2.50 per ATM withdrawal.

TaxSlayer's Refund Advance

Deadline to apply: Available mid-January. There is no specific deadline. 

Amount of the advance: You can apply for an advance of $500 or $1,000. The advance amount depends on the size of your expected tax refund but cannot exceed $1,000. You must use TaxSlayer Classic, Premium or Ultimate for tax preparation, among other eligibility requirements. You also can't be a Vermont resident. The advance amount and your overall eligibility will be determined when you apply, based on underwriting criteria by MetaBank, which is backing the loans. 

How it works: Apply for TaxSlayer's Refund Advance online when you complete and electronically file your return with TaxSlayer. Once the IRS accepts your return, it generally takes 24 hours to get approved for the loan. The refund advance is then loaded onto a new, TaxSlayer Prepaid Visa Card Powered by Green Dot. (TaxSlayer says it applies for that card for you, sending your personal information—including Social Security number—to Green Dot Bank, the card issuer.)

Prepaid card details: The TaxSlayer Prepaid Visa card has a variety of fees.

TurboTax Refund Advance

Deadline to apply: Feb. 15; date is subject to change.

Amount of the advance: You can apply for an advance of $250, $500, $740 to $1,000. Your expected refund must be at least $1,000. Among other eligibility requirements, you can't be living in or filing a return in Illinois, North Carolina, or Vermont.

How it works: After your return has been prepared and electronically filed using a TurboTax product, you can apply for the advance, which will be loaded on a Turbo Prepaid Visa card. An e-mail notifying you of your approval will explain how to set up your Turbo Prepaid Visa account. Within 48 hours of the IRS accepting your return, you can begin spending online wherever the Turbo Prepaid Visa card is accepted. The physical card typically arrives within 5 to 10 business days.

Prepaid card details: Turbo Prepaid Visa card has a variety of fees, including $2.50 out-of-network ATM withdrawal. (Emerald cardholders can use the card without triggering fees.) The Turbo Prepaid Visa allows a one-time, no-free transfer of funds from your card account by check or via automated clearinghouse (ACH) transfer. 

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