Taxpayers who are due a refund from the Internal Revenue Service or state tax agencies when a return is filed often want their refund as quickly as possible -- and some are willing to pay extra to get it sooner than the direct deposit and mail time frames offered by the IRS. Tax preparers can offer several bank products to accommodate the needs of taxpayers who want their cash quickly. Bank products are offered by financial institutions, and these institutions are usually individually associated with the brand of software the tax preparer uses.
A refund transfer is a product that direct-deposits the refund to a special account. A one-time check is printed, or a debit card is issued for the taxpayer, minus any bank fees charged for the service, usually in the tax preparer’s office. This is an option for clients who do not normally maintain a checking or savings account, but do not want to wait for the IRS or state to mail a refund check.
Refund Advances and Loans
Refund advances are loans against the taxpayer’s estimated refund, which may be issued immediately or more rapidly than a standard direct deposit of the refund. However, there is risk associated with this type of bank product because the taxpayer may not receive his entire refund. Most preparer software indicates if the refund is subject to intercept, however other adjustments could be made to the return after it is filed and accepted by the tax agencies. This could reduce the amount of the client's refund.
Tax preparers can offer prepaid debit cards with a taxpayer’s refund advance loaded directly on the card, which might be more convenient for the taxpayer than a standard check. Depending on the type of product offered, a tax preparer may be able to print and issue debit cards in his office, rather than requiring the taxpayer to wait for the debit card to come in the mail.
The fee transfer bank product subtracts the tax preparer's fees from the client’s refund and deposits the fees into the preparer’s business account. The taxpayer receives the remainder of his refund, minus any transfer fees, by the method of his choice. It is not necessary for the client to use other bank products in conjunction with a fee transfer product. For example, a client may choose to pay the preparer's fee by transfer, but have the remainder of his refund direct deposited into his regular bank account. He does not need to use other bank products to receive the rest of his cash.
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