“If the client’s tax refunds do not issue or are insufficient to fully repay the loan, the client is not generally obligated to pay the difference,” an H&R Block spokesman told Consumer Reports by e-mail. “There are certain exceptions, such as cases of fraud.”
Questions to Consider
Is an advance worthwhile for me? That depends on your situation, says Bruce McClary, spokesman for the National Foundation for Credit Counseling (NFCC), based in Washington, D.C.
If you’re in bind-say, finding it hard to pay debts while on federal government furlough-these products, even with interest, might serve you better than racking up interest and fines for not paying other debts, he says.
“An advance could help someone avoid severe financial setbacks,” McClary says. “But I would caution consumers to scrutinize those high-interest products very closely.”
Do I qualify for an advance? If you don’t expect a refund from the IRS, you shouldn’t apply. And some situations may disqualify you. “If the taxpayer owes governmental debt or student loan debt, they may be subject to an IRS offset,” says a Liberty Tax spokeswoman. That offset-an amount the IRS subtracts from your refund-may not leave you with enough to pay back the advance, she says.
The companies require you to complete and file your return-and pay for their tax-prep services-before you apply for the advance.
Will the tax preparer pitch me other services? It’s possible. A storefront tax preparer dealing with you face-to-face could use the opportunity to try to sell you an add-on, says Adam Rust, director of WiseWage, a Durham, N.C., not-for-profit that helps workers who don’t have traditional bank accounts set up direct-deposit accounts.
You might be encouraged, for instance, to take a so-called refund transfer, ostensibly to help you avoid having to pay your tax-prep fees up front. With this option, your refund, when it’s issued, is automatically deposited into a dedicated account, where the tax-prep company takes out the refund advance and fees that you owe. At H&R Block, you’ll pay an extra $ for this service.
Are there any additional costs? Tax preparers could charge you more for their service than doing your taxes yourself using tax software, which can be low-cost or free. And you might pay nothing if you opt for a free, not-for-profit tax-prep concern such as the AARP Tax-Aide or the IRS’s Vita service. (IRS FreeFile allows anyone with 2018 adjusted gross income of $66,000 or www.paydayloanstennessee.com/cities/lafollette/ less to use its tax software to prepare and file federal returns at no cost.)
You might also pay to access your refund, because some of the offers require you to put the advance on a prepaid debit card. Those cards can have fees-$3 to make an ATM withdrawal or $4.95 to reload more cash [PDF], for instance-and they can add up.
“It’s important to know up front what fees might be assessed,” says Suzanne Martindale, Consumer Reports’ senior policy counsel. The additional costs could erode your refund bit by bit, she explains.
H&R Block Refund Advance
Amount of the advance: You can apply for an advance of $500, $750, $1,250, or $3,000, depending on your eligibility.
How it works: After your return has been prepared and electronically filed at an H&R Block location, you can apply for the advance. You’re notified of the decision typically within hours after applying. Funds will be loaded onto an H&R Block Emerald Prepaid Mastercard.
Prepaid card details: H&R Block Emerald Prepaid Mastercard has a variety of fees, including $3 per ATM withdrawal. (Emerald cardholders can use the card without triggering fees.) The Emerald Card allows a one-time, no-fee transfer of funds from your card account by check or automated clearinghouse (ACH) transfer.