Are you a responsible taxpayer? If yes, that is great indeed as every citizen ought to be accountable for their taxes. For those who may fail when it comes to paying in, we can't blame them, as they may also have their reasons; however, those who are consistent tend to enjoy its advantages. Let's say you are in a financial emergency at this moment. You can work on your tax refund and even get a loan at the same time – tax refund cash advance emergency loans can give you the best of both worlds.
Before we apply for tax refund cash advance emergency loans, let's learn first the basics. Also known as the tax rebate, Tax Refund refers to the taxpayer's payment when they have paid more tax than what they owe.
How do tax refunds work? Tax refunds are issued in several forms. As a taxpayer, it will be given to you through a personal check, a direct deposit to your bank account, or through a U.S. savings bonds. Usually, it is an issue within several weeks, starting from the date that you filed the return.
There are several reasons why a taxpayer is eligible to get this refund. These are the following:
- A self-employed or freelancer is required to file a quarterly estimated tax. The taxpayer may have over-paid before he had gone through documentation of deductible expenses since it is estimated.
- A taxpayer that is eligible to get refundable tax credits – these tax credits are known to reduce the amount that you to the government. Most of those tax credits are non-refundable.
- Someone who has failed to update the tax form with the child's birth – if you fail to update your tax form, such as your child's birth, you are eligible to get a child tax credit allowance. Hence, you are eligible to get a tax refund.
- Committed an error in the IRS Form – Accuracy is essential when you need to fill out forms such as an IRS Form W-4. This form is used to estimate the exact amount to withhold for taxes based on your paycheck. It is not that you do it intentionally; we are not sure of that. However, you can't avoid making that error, especially when filling out an important document.
The last two reasons can be easily avoided if the money that is being withheld from the employee's salary was correctly provided on the W-4 form. While it is unavoidable, the tax refund is also a blessing in disguise, particularly if you were laid off just as the year started, and it was difficult to find a replacement. The tax refund is much appreciated because you will immediately be receiving a substantial refund of the actual income you have for the year.
While some may view getting a refund is exciting, well, actually, it is just another term to represent loan. The difference is getting a tax refund is just like getting an interest-free loan from the government. Therefore, one way or another, the money that you will receive is just being borrowed, and you will still be paying it through your taxes, services, or products you purchase throughout the year.
What is a Refundable Tax Credit?
Still, on the reasons why you may get a tax refund, let us talk about refundable tax credits. For the most part, tax credits can’t be refunded, but there are exceptions. These are the following refundable tax credits:
- American Opportunity Tax Credit - this is only available to those taxpayers, allowing them to reduce the qualified higher education costs.
- Earned Income Tax Credit – these are for taxpayers who are identified as low-income or moderate-income workers.
- Child Tax Credit – for 2019 and 2020 tax years, this tax credit can reach up to $2000 and can allow the taxpayer to get a refundable amount of up to $1,400.
While it is exciting and pleasant music to your ears because you will be getting a refund, it is still better to avoid it. Some people view this as another version of getting a savings plan; overdoing it might not be beneficial to you. The IRS can get back at you for getting too much "refund" year after year. The worst situations you can get into for incorrect withholding amounts are getting penalized. You would not want that to happen. You can do it precisely and correctly calculating the amounts and estimates of the taxes you should pay.
Can You Get A Loan On Your Tax Refund?
Some people might have thought that applying for a loan and having it paid by what you can receive from a tax refund is impossible. On the contrary, it is possible, and many have resorted to this solution during financial emergencies. Financial institutions can help you secure a loan and receive it direct deposited into your bank account. If you have filed your taxes, you are just one step behind securing a loan. Continue reading the next paragraphs to discover more about how you can apply and find the financial solution you've been searching for.
Knowing More About Tax Refund Cash Advance Emergency Loans
The Tax Refund Cash Advance Emergency Loans or simply tax refund loan is your financial option during emergencies. This option enables you to get your tax refund instantly instead of waiting for several weeks. The tax refund's usual processing time takes about three weeks before it can be issued to the taxpayer. If you badly need cash and a tax refund is your only option, then you may need to reconsider. Three weeks is already a long time for the person waiting.
No worries, you can solve your financial problem with this loan. All you have to do is to apply for a tax refund. Once the IRS accepts it, you can apply for a loan from a tax preparation company.
Did you know that a credit check is not often required with this loan option? Yes, you read it right. The tax refund is guaranteed and provided by the U.S. government, so repayment for this loan will never be a big issue. Now, this loan option is attracting many borrowers who have low credit scores. If you have a lower score, accessing loan options is difficult – but not with the tax refund cash advance emergency loans.
Usually, once your loan application has been approved, you can expect to get the funds within one day. The probability of having your loan application getting approved highly depends on the tax preparation company that you have chosen. They are the ones that will be preparing your tax return, and of course, it comes with a fee. The fee and the loan repayment will be deducted in full directly from the tax refund. If there is still any remaining balance, the company will be issuing it back to you.
Are you qualified to get Tax Refund Cash Advance Emergency Loans?
In the United States, anyone who is already 18 years of age and expects a tax refund from the IRS is qualified to secure a tax refund cash advance emergency loans. A taxpayer should only have his taxes prepared by one or the same tax preparation service provider. This will also help in verifying your income to ensure that your loan will be approved.
Since it is a cash advance loan, it is just necessary for you, the borrower, to provide proof of a monthly income; most lenders require this. The absolute minimum monthly income that you should have is $800, or for most lenders, you should earn $2000 per month to qualify for the loan. This would lead us to conclude that the higher your monthly income is, the greater the chances of having your loan approved.
The Loan Requirements
In every loan application, there is always a series of requirements that a borrower must comply with. Loan requirements greatly vary on the lender that you are with. Sometimes, requirements depend on who is lending, who is borrowing, and the amount of loan that is being applied for.
Usually, the tax refund cash advance emergency loans will require you, the borrower, to use their tax preparation service. This is almost required in exchange for getting a loan now or in the future. Other requirements may include credit criteria income verification, as well as the tax refund amount. If the refund amount does not reach the minimum amount required, you are not eligible for this loan.
Requirements for an installment loan are less strict, especially if the borrower has poor credit. However, a higher interest rate is much likely to be expected here. Since your credit score is unfavorable to the lender, you can expect stricter parameters and a thorough credit check. Well, you really can’t blame lenders for being like that. On the other side, at least through this process, you will have an excellent interest rate.
The Tax Refund Loan’s Pros and Cons
First off, congratulations on being resourceful and optimistic amidst your financial situation! This is all thanks to the tax refund cash advance emergency loans.
One of the pros of having or using this loan option is convenience. Through this loan, you are practically just borrowing money from yourself. There is also no more paperwork and other requirements to prepare just to qualify. Well, there might be some, but it will highly depend on your lender.
The full loan repayment will automatically happen once the refund had been processed. Therefore, you will no longer get into a situation where you have to pay interest fees or monthly repayment. Good thing that there is this loan option as it will save you time from waiting and being able to solve your problem as soon as possible.
One of the cons of this loan option is that you can't apply for a higher amount. The amount you can loan should be within the amount of tax refund you would be receiving. In most cases, available loan amounts are under $2,000 only, but who knows if you will be able to get a higher loan from other lenders. It will still be up to you if you can manage to find a lender with better options.
Getting the Loan and the Cost in Return
Have you ever wondered how much will this loan cost you? It is just reasonable that you are already thinking in advance on the possible costs you need to repay once approved. While you are just waiting for your tax refund to be processed, it is still better to know how much it costs and other underlying charges.
Almost all of the tax preparation service providers offer this loan option without any interest or fee for the amount that you borrowed. Wait, before you jump for joy here. It doesn't mean that they have stated it is free; it is 100% free. The cost of this loan is already embedded in the price of their service. For instance, you hire a company to file taxes on your behalf, you might be paying them $59 to do so, but it is already way higher than what they usually charge.
With this, you might want to be aware of the fees and the hidden fees on a tax refund loan. You might think that it will not cost you if it is issued through a debit card. Well, the truth is, there is still a small cost that comes with it. Reality check: nothing is free in this world, especially if it talks about the loan, tax preparation, and the provided service.
Therefore, depending on the loan you are applying for, you should be expecting a change from its price. It could be at a reasonable price, or it may cost you even more than you imagined.
What is the best solution to evade these costly loan fees? File your taxes and tax refund, as well. There is this software provided by IRS that you can easily access, and it's for free! You can use this software to fill out the form if your income is under $69,000 or if it is higher, you can always fill out the proper forms there. If you are avoiding filing a tax refund loan, it would really be helpful if you file your taxes at the beginning of the year. Why? This will help you get a refund sooner than you expected.
Tax Refund Loan Alternatives
What if your loan application was not approved? If that happens, don't lose hope – there are other options out there for you. For those who didn't get the expected loan approval and for those who needed an amount higher than the tax refund, here are the following alternatives for you:
- Payday Loans – similar to tax refund cash advance emergency loans, this loan option doesn't require a credit check. However, you will be required to make a full loan repayment through your next paycheck. Its loan term is two weeks on average but not exceeding 30 days. It is like you need to make ends meet to be able to get this loan fully paid by the next paycheck. What if you can't? The chances are that you might need to make a salary advance in the coming month to make up for the repayment. This will lead you into a cycle of pay advances, but you can confidently apply for this loan if you have faith in your next paycheck.
- Personal Loans – compared to tax refund loans, this loan option is much safe and manageable. Through this loan, you can borrow an amount ranging from $2,000 up to $40,000. Loan repayments are made monthly, and it also comes with a fixed interest rate. However, this loan option requires a credit check so, if you have a low credit score, you can expect to loan only a smaller amount.
- Installment Loans – even if you have a credit score issue, it will never be a problem with this loan option. This loan option has a structure similar to personal loans – you need to make monthly repayments, including the principal amount and the interest rate. It also has a fixed interest rate, but this is given to allow consistent payments over the term required.
There you have it – the alternative loan options that you can apply for other than the tax refund loan. These options offer you varying loan amounts that can definitely solve any financial emergency you are in. You just need to do your part in accomplishing the structured monthly payments, including the fixed interest rate and the principal amount borrowed.
Repayment options for these loans are much more manageable as long as you are doing part. You might be tying yourself into a more substantial financial commitment, given that you will be linked to monthly payments for an extended period. Well, you wouldn't be committing yourself if you didn't need this to solve your problem, but since you needed it, try to do what is required, and you might not even notice that you are already finished with the repayments.