Tax Refund Anticipation Loan (RAL)
Tax Refund Anticipation Loans or RAL are bank products just like any other short term loans that banks offer. Banks are getting creative in lending and the Tax Refund Anticipation Loan or RAL is one of the creative financing options that banks have introduced to make money off of taxpayers who want to get access to their tax refunds faster than the IRS could accommodate. Bear in mind that different banks offer different Tax Refund Anticipation Loans. Different tax preparers are associated with different banks and while most tax preparers have access to some types of Tax Refund Anticipation Loans (RALs), these Tax Refund Anticipation Loans will be coming from different banks.
Currently, there are two main Tax Refund Anticipation Loan (RAL) products: the regular or classic RAL or the RAL Advance.
The regular RAL or Tax Refund Anticipation Loan
The Tax Refund Anticipation Loan (RAL) is a short term loan secured by the expected value of the federal income tax refund.
When will I get my money from the Tax Refund Anticipation Loan?
When a tax return is filed with the IRS and the IRS has accepted the return, the bank will give the taxpayer a loan based on the amount filed and accepted by the IRS. The bank collects later from the IRS. Note that the IRS has to accept your tax return before a Tax Refund Anticipation Loan is processed and approved or denied.
Bear in mind that if you apply for a RAL, you are applying for a loan and RAL loan works just like any other short term loans. That means the bank is in control of the decision whether to approve you for a RAL. If the bank approves, then the bank is also in control when to send you the money. Dealing with banks can be difficult, not just in cases of RALs but for any other reasons. Banks like to charge fees and high interest rates and if you apply for a RAL, they will do just that.
Applicants of the RAL will have whole or part of their Tax Refund Anticipation Loan within about 24-48 hours after the IRS accepts the return. Checks are usually picked up at the tax preparer's office where you applied for the RAL.
Can I use the Tax Refund Anticipation Loan to pay for the tax preparation fee?
Most of the time, yes. Most tax preparers can deduct the amount of tax preparation fees from the Tax Refund Anticipation Loan (RAL) so the taxpayer can walk into the tax preparer's office, do the tax return, file the tax return, walk out without paying anything (if the taxpayer qualifies for the RAL) and then a few days later come back and collect the RAL check.
Are the Tax Refund Anticipation Loans guaranteed?
No. The Tax Refund Anticipation Loan is just like any other loans, the bank decides whether to approve the taxpayer's application for the Tax Refund Anticipation Loan or reject it. If a taxpayer applies for a RAL but is rejected, then the taxpayer will receive the tax refund whenever the IRS releases the refund which can take 8-15 days.