How to Qualify for Rapid Refund

Rapid tax refunds come with a high price.

Rapid refunds refer to refund anticipation loans (RALs) that allow filers to receive tax refunds immediately or within 24 to 48 hours. The Internal Revenue Service does not approve refund anticipation loans and has no responsibility should something go wrong. Consumers who opt for this method of return must understand that RALs are short-term loans, and they require repayment even if the refund is less than the loan. Actual tax refunds may be less if there are offsets for child support or other federal debt. Interest rates for this immediate tax gratification range from 50 to 500 percent.

Instructions

1. Choose a tax preparer of no relation to you. The preparer cannot be an immediate family member defined by a whole or half-blood relationship. This includes full siblings, stepsisters or stepbrothers or spouses. In addition, the preparer cannot have interest in any stock held by you.

2. Make sure the preparer is reputable. Trustworthy RAL providers disclose all information regarding the rapid refund. The IRS requires that all RAL providers inform filers that the IRS does not provide rapid refunds. Providers must also tell filers that RALs are loans, that the filer is responsible for all fees and that the fees come out of the refund immediately. A rapid refund provider must have the filer’s written permission to disclose tax information to the lending institution. All providers must charge the same flat rate to all customers.

3. Be at least 18 years of age with standard W-2 forms. When filing a joint return, both filers must be 18 years old. Generally, active duty military service members or their spouses, dependents or children cannot receive rapid refunds due to the high interest rates. The Servicemembers Civil Relief Act caps interest rates at 36 percent for payday, title and refund anticipation loans.

4. Live in the United States, a U.S. territory or U.S. possession.

5. Meet minimum refund amount requirements. RALs require a tax return of $300 or more without any refundable credits such as the Earned Income Credit, Adoption Credit or Making Work Pay Credit. First Advance RALs require a refund of at least $2,500. First Advance RALs refund up to $1,500 instantly. You must have at least $100 left after the deduction of fees to receive a RAL, and no pending offsets.

6. Contact the Treasury Offset Program Call Center of the United States Department of the Treasury to make sure you have no pending offsets.

7. Agree to pay all fees associated with the rapid refund. This includes amounts your refund does not cover. Complete and sign all applications and agreements associated with the RAL loan.

Tips & Warnings

• Inquire about fees and interest rates before signing any paperwork for an RAL loan.

• RAL loan amounts will vary by lender.

• Defaulting on a rapid refund can damage your credit rating.

References

• Liberty Tax Service: Refund and Loan Options
• Internal Revenue Service: Financial Products: RALs and Other Financial Products
• Center for Responsible Lending: Five Reasons to Avoid Instant Tax Refunds
• Cornell University Law School: Legal Information Institute: Losses, Expenses and Interest with Respect to Transactions Between Related Taxpayers
• W.O. Green Corporate Services, LLC: Refund Anticipation Loan (RAL)
• Federal Deposit Insurance Incorporation: Financial Institution Letters: Consumer Protection: Service Members
• Internal Revenue Service: Refundable Credits
• Pendleton & Goudy Tax Service: First Advance RAL

Resources

• United States Department of the Treasury: Financial Management Service: Tax Refund Offset