It would be great if the annual tax deadline was in October so your refund would land in your hands before you gear up to tackle that holiday shopping. Unfortunately, you can’t file your tax return until after December ticks down and all that year’s income is accounted for. Even then, you’ll have to wait a few weeks to receive your Forms W-2 and 1099s, and until the IRS officially begins accepting returns, usually after mid-January.
You have some options to hasten things along, at least when it comes to being able to spend some of that refund money, but they have some disadvantages.
Read More: Where's My Tax Refund? An Easy Guide
Numerous tax preparation services offer refund advances or loans, sometimes called “refund anticipation loans.” Just pay the service to prepare your return and they’ll front you at least a little of the money you have coming to you from the IRS. The advance is typically deposited onto a prepaid credit card.
Unfortunately, most tax services won’t let you get your hands on the money until the IRS accepts your tax return and again, that's sometime in mid to late January at the earliest. This makes sense because these services, in cooperation with banks, are fronting money that they’re sure you have coming to you. They could be in a real bind if the IRS declines to accept your return for some reason.
Read More: Free Tax Preparation for Low Income Families
These loans are not necessarily equivalent to your full expected tax refund. When the IRS does finally issue your refund, you get the balance after the lender debits the amount of your loan.
These loans are no longer available directly from banks. You must go through a tax preparation service, but the most reputable of them offer this type of loan.
A Few Examples
All these loans are payable through your tax refund when you receive it. Your refund typically goes directly to the bank or to the tax service, then you get the balance of your refund, less fees and interest. And interest charges can run high.
- H&R Block offers up to $3,500 on the H&R Block Emerald Prepaid Mastercard…but not until after Jan. 4, 2020. You’ll have to provide your Social Security number, the amount of your previous year’s tax refund, and full contact information to apply. You should receive a verdict as to whether you’re approved within 48 hours via text or email. The break with this tax service is that you won’t be charged interest.
- There’s a 48-hour waiting period with TurboTax as well, but it doesn’t begin until the IRS actually accepts your return and you won’t know if you qualify until after you actually file. Your anticipated refund has to be at least $1,000. You can begin spending online immediately, even before you receive your card in the mail…but, of course, this won’t help you in December. Advances are available in $250 increments, ranging from $250 to $1,000, in cooperation with First Century Bank or Green Dot Bank.
- Then there’s Jackson Hewitt. This tax service offers three types of loans: the Early Refund Advance, the No Fee Refund Advance and the Go Big Refund Advance. The Early Refund Advance stands head and shoulders above the others out there because the money is available on Dec. 16, 2019 if you’re an existing Jackson Hewitt customer, two days later if you’re a new customer…yes, in time to squeeze in a little holiday shopping. Unfortunately, the Early Refund Advance caps out at $500, so spend wisely. You can have the money deposited on an American Express Serve Card or direct deposited into your bank account.
Buy Now, Pay Later
Maybe you don’t want to have to go through all the hassle of applying and qualifying for one of these loans, and you already have some credit cards in hand and you have to shop now. Nothing says you can’t use other sources of funds then pay yourself back when you do receive your refund...but proceed cautiously.
For example, you can resort to your plastic, then pay down your balances when the IRS comes through for you. You probably won’t save much on interest charges, however. Credit card interest rates can run anywhere from about 14 percent up to more than 24 percent, so you’ll really want to pay those balances off immediately as soon as you do receive your refund.
Read More: How to Check Status of Income Tax Return
And, of course, you’ll want to use the card or cards with the lowest rates, which are generally not store credit cards. Don't neglect to check lenders for cash-back offers as well.
Avoid Potential Problems
Take a few steps in December to ensure that everything goes smoothly and you can get that refund in hand as soon as possible and square your finances away.
The IRS recommends taking a moment or five in December to double-check with any entity that will be issuing you a year-end tax form. Think W-2s and Form 1099s here – all that paperwork you'll need to prepare your return. Make sure they have your correct address and other necessary contact information so as to avoid any unnecessary delays when they send these forms out in January.
And it goes without saying that you’ll want to bring both the IRS and Social Security up to speed if you've changed your name since filing your last return.
Keep in mind that claiming some tax perks can bump receipt of your anticipated refund back considerably, sometimes by several weeks. Claiming the Earned Income Tax Credit will, by federal law, delay your refund until the end of February. Claiming the home office deduction for your small business can result in delays, too, because the IRS has found that this is a hotspot for mistakes so it tends to review these claims closely for errors.
If you run into a problem or an inexplicable delay, you can call the IRS, but wait at least three weeks after e-filing your return or six weeks if you snail-mailed it in. Or you can just check your IRS tax refund status online at www.irs.gov/refunds.
Given all the variables involved, it’s probably best not to hinge your plans and your gift-buying strategy on receiving your refund by an exact date or in an exact amount, but you should have some wiggle room in an emergency.
- IRS: Get Ready Today to File 2019 Federal Income Tax Returns
- TaxSlayer: When Will I Get My IRS Tax Refund?
- TurboTax: How to Use Your Tax Refund to Recover From Holiday Spending
- H&R Block: 0% Interest Tax Refund Advance Loan
- TurboTax: Refund Advance
- Jackson Hewitt: See If You Prequalify for a Refund Advance Loan
- Center for Responsible Lending: Tax Refund Loans – Instant Trouble
Beverly Bird has been writing professionally for over 30 years. She is also a paralegal, specializing in areas of personal finance, bankruptcy and estate law. She writes as the tax expert for The Balance.