Tag: refund anticipation loans

Posted on by Jan Roberg

Tax Refund for Christmas 2013

82/365 - my christmas eve buddy.

Photo by B Rosen at Flickr.com

 

If you normally use your income tax refund to pay for your Christmas presents, listen up.  You’ve got a problem.

 

First, nobody is doing Christmas loans.  Remember when H&R Block and Jackson Hewitt used to provide loans against your refund?  Then the IRS changed the “debt indicator” which made it almost impossible for anyone to offer those loans.  A few companies provided Refund Anticipation Loans, (the loans where you got your refund in 1 or 2 days instead of two weeks) but they were few and far between.  Most people had to wait for two to three weeks to get their refund.

 

Now the IRS has announced that tax filing will be delayed—meaning that instead of accepting tax returns on January 21st like they had previously announced—they won’t accept returns until January 28th, and maybe not until February 4th.

 

What does this have to do with Christmas?  Well, if you’re putting holiday gifts on your credit card in the hopes of paying it off with your tax refund—you’re not getting your refund until mid to late February at the earliest.  If you can’t afford to pay your credit cards without your tax refund—you’ve got a problem.

 

So what other options do you have?   For some people, if you know that you’re going to have a refund on your taxes, you can change your withholding now so that you get more money in your paycheck.  If you’re reading this in October or early November, you’ve got a chance to put away some extra cash for presents.  If it’s already December by the time you see this—it’s probably too late.

 

Here’s something else you need to know.  If you have your taxes done by one of those corner shop tax companies, they will gladly take your money and tell you that they’re filing your return.  You might think that you’re filing on January 3 or 4th, but you’re not.  What they’re doing is “stockpiling” your return.  They hit a button, it gets sent to a big corporate server, but it just sits there until the IRS says they’re accepting returns.

 

Why is that important to know?  Because people think that they need to file early to get their refunds.  But those early returns are often wrong.  They’re missing information, or the software’s not fully functional yet.  The IRS needs time to work out the glitches and if the IRS is having glitches, so are all the other tax companies.  If you have the big green tax company send your tax return to their server and then you discover a problem with it, you can’t take your tax return back.   It’s too late.  And if your tax return is sent in with a mistake it could delay your refund for weeks, or even months.

 

There aren’t a lot of options out there for using your upcoming tax refund to pay for this year’s holiday gifts.  But you know what?  Christmas comes every year.  Every year!  Once you do receive your refund, it might be the only time in the whole year that you’ve got extra cash.  Take some of your refund money and stick it in the bank so you’ve got cash to pay for your 2014 Christmas.    Seriously, you never want to be dependent upon the IRS for you to have a Merry Christmas.

Posted on by Jan Roberg

When Can I File My 2011 Tax Return?

stopwatch

Photo by Julian Lim on Flickr.com

I’m posting this in September of 2011—that means we have over three months before the year is even over. If you’re asking this question now, it means you’re expecting a refund—which is good—but the bad news is you’re not going to see it for quite a while.

Hopefully, here are some answers you’re looking for.

Although the IRS hasn’t posted any official dates yet, generally, the first day that you can e-file a return will be the day after Martin Luther King, Jr. Day—basically the middle of January. Please don’t hold me to that, Congress can always come in and mess things up, but that’s usually the earliest you can e-file.

Last year, because Congress had slowed up the e-filing for lots of people’s returns, folks asked, “Can I just mail my form in before the e-file date if I’ve got everything done?” The answer is “No, don’t.” The IRS will just toss your mailed return in a corner and not open it until they’re allowed to and your return will get processed slower than the e-filed returns so you really don’t want to do that.

What about those loans you can take against your refund? When do they start and who has them? That’s a really good question. Last year, the IRS changed its practice of providing something called a “debt indicator.” If you filed a tax return through a company that issued Refund Anticipation Loans, the IRS would send back information saying whether you had a federal tax levy against you or not. If there was no “debt indicator” then it was safe to assume that the bank issuing the Refund Anticipation Loan would get its money. If a taxpayer had a debt indicator flag, then they wouldn’t get the Refund Anticipation Loan.
The problem is that the IRS refuses to issue a debt indicator anymore so banks aren’t willing to take the risk. Refund Anticipation Loans have virtually dried up. Last year, only one tax business in my area offered a Refund Anticipation Loan but it was limited in scope.

The Advance Refund Anticipation Loans or Christmas Refund loans were pretty much based on the same principal. As of this writing, I know of no one who is issuing advanced money for the 2011 tax year. If anyone is, it’s doubtful they’ll offer that program anytime before Thanksgiving.

Is there anything I can do to get my hands on my tax money? In 2011, probably not: Congress repealed the advanced EITC law which used to allow you to claim your EITC in your paycheck. If you have federal income tax withholding taken from your pay (not Social Security and Medicare, but federal income tax) you can change your withholding so that you get more take home pay. There’s a calculator on the IRS website that can help you figure out how many exemptions to claim. http://www.irs.gov/individuals/article/0,,id=96196,00.html
You’ll want to have your most recent pay stubs and your last tax return handy as you fill in the answers. It’s a pretty good indicator of what your refund will look like come tax season and if changing your W4 could benefit you.

A word of caution: The IRS clamped down on Refund Anticipation Loans because it felt that those loans were harmful to consumers. They basically put the big tax companies out of the loan business because they have to follow the rules. Sometimes, shady guys slip through the cracks. So here’s the warning—if you find a tax business that does refund anticipation loans ask a lot of questions. How long have they been in business? What happens if there’s a problem with your return? How will you get your money? How long will you have to wait for your money? What are the charges for the loan, for the tax preparation, etc.? If you don’t feel safe, if your questions aren’t answered to your satisfaction, then walk away.

You can get free tax preparation from VITA or the IRS. If you have a bank account, you can have your refund direct deposited within two weeks of filing. You’re already going to have to wait for a few months anyway, if you can hold out for just a little bit longer you can save yourself hundreds of dollars—money that you can spend on you, your kids, your rent, etc. Good luck.