I came across this comment and thought it was worth sharing because this topic comes up often:
“As someone in the industry… NEVER take one of those refund advance loans. They’re expensive, and things like this can happen. The preparer or office gets a rebate from the loan company. Since higher fees are tied to bigger loans, it pushes them to do questionable things on your return to increase the refund.”
Can we vote u/RasputinsAssassins for IRS Commissioner? They’re right!
Soren said:
Can we vote u/RasputinsAssassins for IRS Commissioner? They’re right!
What would happen to you though? Would you lose your spot as Commissioner?
Soren said:
Can we vote u/RasputinsAssassins for IRS Commissioner? They’re right!
What would happen to you though? Would you lose your spot as Commissioner?
Have you seen the mess in the news lately? I’d take the risk!
One year during tax season, I saw signs for “Free Tax Preparation” with amounts listed for 1 kid, 2 kids, etc. The amounts matched the Earned Income Credit (EIC) for my state. My guess is that they prepare taxes for low-income folks who qualify for EIC, then offer them an advance check while taking a big chunk in fees.
It’s predatory behavior, plain and simple.
We, the customers, don’t benefit from these loans at all. The company does, though.
My preparer asked if I wanted a refund loan, and I said yes without realizing how much it cost. Then I overheard her telling her friends not to do it because it’s too expensive. People are wild sometimes.
My first job in high school was with a tax prep company. I was doing taxes for other people before I had ever filed my own. I actually liked the work and thought about going back to it as a side job. But now, the whole industry feels so predatory that I can’t bring myself to do it.
Here’s a crazy idea:
@Kingsley
A lot of the huge refunds I saw at the big-name tax prep places weren’t from withholding. They were from refundable credits.
Unpopular opinion incoming: Some people get themselves into these situations. I used to work at one of those big tax prep chains, and I’d see clients excited to use their refunds for big-screen TVs or other non-essentials.
They’d take out refund loans because they wanted the money that day. They’d also have their tax prep fees deducted from their refund because they didn’t have the money to pay upfront. And they kept coming to the big tax prep companies, despite the high fees, because of the convenience.
It’s hard to blame predatory practices entirely when people are making those choices.
Not every refund loan has fees as long as it’s paid back quickly (usually with the refund). For folks who truly need the money, they’re not the worst option. But if you don’t need money immediately, they’re pointless. Refunds come pretty fast nowadays anyway.
I see people take these loans most often when they file early but can’t get their refunds until mid-February because of the PATH Act. If you do go for a refund loan, stick to a well-known company like H&R Block and avoid sketchy mom-and-pop places.
Poor people need access to money in ways that others don’t, so I try not to judge too harshly.
@Blair
Fair point.
They’re probably better than payday loans for people who need cash right away.