Refund Anticipation Loans and E-Filing

SHOULD I TAKE A REFUND ANTICIPATION LOAN
to get my refund quicker?

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What is a RAL?
A Refund Anticipation Loan is NOT a refund per se. It is a high-interest loan from a bank.
If there is any problem about the tax refund , your refund may take even longer.
Some problem areas are delinquent student loans and unpaid child care you owe.
Direct Deposit
A better approach is to file your return electronically and have your refund deposited directly into your bank account. This usually takes ten days or less and costs nothing extra.

The IRS calls electronic filing “truly the wave of the future.”

Some negative aspects:
What they don’t tell you is that many returns that will go through with no problem, if paper filed, may be rejected when e-filed. An incorrect social security number, a wrong date of birth for yourself, your spouse or your dependants will cause a rejection.
E-filed returns must contain the Employer ID numbers of all W-2s and Form 1099Rs that you receive and a wrong number would cause a rejection.

Some positive aspects:
If all the ‘I’s” are dotted and all the “T’s” are crossed, an e-filed return, if accepted by the IRS, is usually acknowledged quickly. If the preparer made certain mistakes, he gets a rejection notice promptly and can often correct it promptly and re-submit it. With a paper return, the IRS usually accepts it, but may find errors later and the return has to be re-done or an amended return may be necessary. If you paper-file with an incorrect Social Security number the return will probably be accepted but your retirement benefits will be impared. E-filing forces the tax preparer to correct Social Security Numbers.

My policy.
I do not participate in Refund Anticipation Loans arrangements
My policy is to file returns electronically if the client asks me to do so. Also if a fairly large refund is involved, I usually suggest that the client consider e-filing to get the money as soon as possible. I do NOT charge extra for e-filing, but I do not e-file for anyone who prepared their own return and do not do ultra-simple returns unless it is for a client’s child with a part-time job.



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This information is not intended to be advice to the recipient.In compliance with Treasury Department Circular 230, unless stated to the contrary, any Federal Tax advice contained in this Blog was not intended or written to be used and cannot be used for the purposes of avoiding penalties.