Several tax companies allow you to get you filing fees and refund paid in advance, based on your estimated refund amount when filing with their tax software.
But there is a clause in most of these advance fee or refund agreements that allows funds to be debited from your account by a certain date, which is generally tied to your estimated refund date plus a few weeks.
For example, if using TaxAct and you choose filing fees to paid from your tax refund, their settling bank – Republic Bank – will automatically debit your bank account 75 days after your original estimated refund date.
This is per their Refund Transfer Application and Agreement, which you would have signed when filing your return.
All this works fine, except when your actual IRS refund processing time takes much longer, which has been the case over the last few years due to IRS processing delays.
In this case you may get a nasty surprise and find your bank account was automatically debited, which may result in overdraft penalty fees if you don’t have enough money in your bank account.
The tax filing company and/or the bank will send you a notice a few weeks in advance of this happening, but this may get overlooked. Further reminders will be sent before withdrawal so pay attention to communication from your tax provider and/or their bank.
So if you are facing extended delays with your refund payment from the IRS and have signed up for a refund filing fee or a refund advance loan, be aware of this automatic debit date and ensure you contact the bank or financial institution to see if you can get into some kind of payment or plan or get an extension on when the fees will be deducted.
Contacting the IRS for this issue, unlike other direct debit issues, won’t be of much help since they are not involved in advance fees or refund loans that tax payers get via their filing providers.