Can I Get My 2023 Refund Early Via a Cash Advance or Holiday Tax Loan?

Be it the need to get your refund payment early for an impending obligation or to get ahead of long delays in IRS refund payments, many tax filers are opting to get paid early via a refund loan.

However before you opt-in for a tax refund advance, refund anticipation or holiday loan, make sure understand what you are getting into, which this article will help you navigate.

What Is a Tax Refund Advance Loan?

Nowadays most leading tax software providers offer an advance refund payment (or loan) option for tax returns they have validated and submitted to the IRS.

A tax refund advance is basically a short-term loan made by an underwriter (via your tax software provider) that is ultimately repaid through your expected tax refund.

Tax software providers are basically saying they are confident, based on the data you provided, that your refund estimate should be what the IRS will actually pay and as a result giving you an advance on that payment – normally within 24 hours – versus waiting for up to 21 days (or more) to be paid via the IRS.

You will generally get the option for a refund advance payment after completing your 2022-2023 filing with the tax software provider and before submitting your return to the IRS. Funds will be deposited into your selected bank account or prepaid card.

But the question is, “Is it worth it?” and “What are the catches?”

Refund Advance Loan

Where Can I Get a Advance Tax Refund Loan?

Below is a summary of the options available from some of the larger players and items to be aware of, if you go forward with this option to get your refund payment faster.

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Tax ProviderMin to Max Advance RefundPayment Timeline
TurboTax Refund Advance$250 to $4,000Many filers receive payment within minutes and 99% within one day. You will however need to open a free Credit Karma Money account and can spend your advance refund funds anywhere via their (virtual) debit card is accepted. See more details on TurboTax site.
H&R Block Refund AdvanceUp to $3,500If approved, your advance refund loan will be available the day your filing is accepted, on an H&R Block Emerald Prepaid Mastercard. You will need to e-file through a participating H&R Block office to qualify. Get more details
Liberty Tax Easy Advance $500 to $6,250If approved, most loans are available in 24 hours or less if direct deposit is selected

In order to be considered for a tax refund loan, it is necessary to have your taxes prepared by the company providing the loan. They will verify your return and determine the amount and eligibility for a refund advance payment.

The minimum expected refund amount to qualify for the loan may vary by company and it is possible that you will only receive a portion of your anticipated refund in advance.

Key points to note with most advance refund (loan) programs:

To qualify for a refund advance the return will have to be filed and accepted by the IRS. You will also need to file within a certain time – normally from late December until the late February, depending on provider – to qualify for the advance refund option. Filing can be done online (e-filed) or in an office location if available.

Most or these advance refunds programs are underwritten by a bank or financial institution that these tax providers outsource the administration of these refund loans to. They will handle most of the correspondence with you after the loan is issued and send you notices when it comes to repayment.

As a result you may be subject to more underwriting criteria – like showing proof of your income via a W2 – which will be provided at the time of application (read the fine print!).

Finally, remember that your advance loan will have to be paid back by a certain date, irrespective of when you get your actual refund. This has caused unexpected payment surprises in recent years due to ongoing IRS delays in paying refunds.

Refund Holiday Tax Loan

While refund advance loans generally require you to complete a full filing with the tax software provider to get paid early, some companies are also providing tax holiday loans simply based on a questionnaire, your W2 and past tax returns (if applicable).

However tread carefully with these holiday loans as they can be expensive if you don’t understand the fees, repayment schedule and other payment terms.

Finally, while it may be possible to get multiple holiday loans since you are not filing a return with a particular tax software provider, this is a slippery slope if you cannot afford to repay one or more of your loans and unlike a standard refund advance loan it could impact your credit score.

Fees and Transaction Costs?

While there may be some transaction costs and other filing related fees (based on the complexity of your return) to process the advance refund payment, make sure you are not paying any hidden loan fees and have a 0% APR on the advance refund loan – features all reputable providers now have.

Getting your refund in advance should not look like an advance paycheck/payday loan scheme. If it seems that way then don’t proceed.

Before you hit the submit filing button, make sure you choose the refund advance option. You will be prompted to do this if you are due a refund, but double check. Otherwise you will just have to wait for the refund per the normal IRS refund processing schedule.

How Will I Get the Refund Advance Payment?

If approved for a full or partial advance payment after filing your taxes, you will receive your approved payment through a prepaid card – which may have its own restrictions and fees.

Turbo Tax pays via a Credit Karma debit card, Jackson Hewitt sends funds via a Serve American Express Prepaid Card while H&R Block pays via an Emerald Prepaid Mastercard.

Or the funds can be transferred into your nominated and verified bank account per your tax filing.

Once the IRS processes your refund, your tax filing software provider or preparer will deduct the loan amount, interest and other disclosed processing fees from your refund payment.

If you have a refund balance left over after all deductions and fees, you will get paid any remaining balance. On the flip side if the IRS determines your refund was lower than what you claimed via your filing, you will be liable to pay the difference.

Why was My Refund Advance Loan Rejected or Denied?

As tax season starts many filers are seeing their refund advance rejected or lower than expected. There are a few reasons for this, which are mainly tied to actual tax refunds being lower than expected in general.

With the elimination of pandemic expansions to many tax credits (CTC, dependent care credits etc) and no new stimulus payments, lots of folks with dependents are likely to qualify for much smaller refunds.

Your refund advance is generally based on your filing and likely refund the IRS will pay to you. So if the expected refund is lower, then your advance loan will be smaller.

And in cases where you qualify for a refund, it may not be above minimum limits for these loans (see table above). This means your refund advance will be denied or rejected.

There are also cases where the information you provided is unable to be verified (e.g freelancer income) or incorrect which could cause your refund loan to fall through.

Finally, there may be situations where your refund loan was approved but once the IRS accepted it, it got denied. This is generally because you had an offset (debt the IRS was collecting on behalf of another agency) or some other reason based on IRS initial processing.

refund advance not approved and rejected

You will get an email or letter from the provider explaining the issue and reason for rejection. Note however that this is a rejection of your advance loan, not your actual IRS tax refund which will be paid per normal schedule.

Will My Credit Score Be Impacted?

Your credit score should not be impacted by getting a refund advance loan. The underlying financial institution behind the payment bank may review your credit report as part of your application, but the review will not impact your credit score.

The refund advance is technically a loan; it is not your actual tax refund. While leading tax software providers do a very good job of estimating your refund (based on the information you provide), should your tax refund be lower than expected and lower than the refund loan you will be obligated to pay back the difference.

So read the terms and conditions of the refund loan carefully and what your obligations are if your refund amount is expected to be lower based on trends you have seen over the last few years.

Cases where I have seen this happen are due to significant changes in income from freelancing, self-employment jobs, divorce or issues with both parents claiming dependent payments.

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