Your Tax Refund Is Likely to be Late – Should You Get a Refund Advance?

couple frustrated doing their taxes
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The IRS started processing income tax returns on February 12. The people who file earliest tend to be those who are owed refunds, especially from the earned income tax credit and the additional child tax credit. This year, that group includes people who were eligible for stimulus payments but didn’t receive their money.

See: 8 New or Improved Tax Credits and Breaks for Your 2020 Return
Find: Filing Taxes Will Be Different This Year — Here’s How to Make It Easier

The agency has said that it will begin sending out funds to tax filers in early March, which is a long time for people to wait in an economic crisis. Delays in mail, weather-related closings and high demand may drag the wait out longer than normal.

Rather than wait, many people turn to refund anticipation loans or other cash advance programs offered by income tax preparation firms. These are usually structured as loans that will be repaid out of the refund. Unfortunately, the programs often come with very high interest rates and fees.

The high rates and fees are especially frustrating because the length of the loan is short (rarely more than two months outstanding) and backed by near-certain collateral — the refund itself. The current Treasury bill rate is 0.07%. These loans have similar risk because they are being backed by another government obligation, the refund.

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See: What Are Refund Anticipation Loans (and Are They Really Worth It)?
Find: Make Your Tax Refund Work for You by Doing These 6 Things

By all means, avoid refund advance loans if you can. If you can’t avoid them, Marketwatch recently reviewed the costs of different income tax refund advance programs and found the following:

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About the Author

Ann Logue is a writer specializing in business and finance. Her most recent book is The Complete Idiot’s Guide: Options Trading (Alpha 2016). She lives in Chicago.

Your Tax Refund Is Likely to be Late – Should You Get a Refund Advance?
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