Rapid Refund, Fast Online Tax Refunds

With the tax season approaching much too quickly, countless businesses are tripping all over each other in a fierce competition to get your business. Even those that offer free online tax filing options are vying for your attention with the hope that you ultimately opt for their upgraded version of a more comprehensive software alternative that carries charges.

All this courting may initially be flattering but then you recall that it is income tax for Uncle Sam that is involved here and that his bodyguard is the ever daunting Internal Review Service (IRS), your pumped up ego suddenly deflates and you becomes leery and are feeling overwhelmed and confused. Hold on to those feelings because they are the ones that will, hopefully, keep you from making the wrong decision.

Let us first define out terms so that we understand what we are truly talking about:

- Fast tax refunds. All electronically filed (e-filed) tax returns, regardless of which software package or company is used, result in a much quicker tax refund if and when the tax payer in question indeed qualifies to receive a tax refund. As a matter of fact, tax refunds can be in the tax payers’ possession within ten business days when filing electronically versus the six to eight weeks that conventional paper filing offers. I would call that a very fast tax refund.

It is important that you, as a tax payer, are aware that the speed of the refund does not depend on the tax preparation firm that you use nor does it depend on the tax preparation software. It is the method of filing that is the key and major factor and, I suppose, the Internal Revenue Service (IRS).

Two more important facts about electronic filing are: a) It is safe and very secure, and b) according to the Internal Review Service (IRS), it is by far most accurate because all of the software packages are programmed, in one way or another, to screen out many errors and omissions.

Electronic filing of tax returns is definitely a win-win situation. I highly recommended it, as does the Internal Revenue Service (IRS).

- Rapid refunds, however, are completely different and, in spite of their similar names, are not to be confused with fast tax refunds. Rapid refunds are also known as Refund Anticipation Loans (RAL) and they are offered by some tax preparation firms to taxpayers who want to have their refund right away. In most cases their money is in their possession within twenty-four to forty-eight hours. And here is where I would advise taxpayers to know what they are getting themselves into when opting for such rapid refunds or the refund anticipation loans because they are quite costly.

Taxpayers who are choosing to receive rapid refunds are charged loan fees that range from $29 to $120 which amounts their Annual Percentage Rate (APR) to anywhere between forty percent to seven-hundred percent or higher. On top of these fees there are the fees for electronic filing and tax preparation that usually add up to ten percent or more.

Another issue that needs to be considered is that the amount of refund anticipated is not a guarantee. The Internal Revenue Service may delay, reduce or even deny the refund but the loan will have to be repaid at the rate that has been agreed upon.

I would advise against this option unless it is absolutely unavoidable.

Posted in Tax Preparation & Software