Tax Loans

Paying your tax is a burden to practically everyone. Once it is tax paying time, life turns into misery. However today there are tax loans, which can and has to be used only for paying tax dues.

Though there is basically nothing wrong or illegal with tax loans, you have to be aware of the fees that are charged for these tax loans. These tax loans are referred to as tax refund loans and 'pay stub' loans which come with atrocious fees. The main reason for the tax loan charging high fees is that it is a short term loan, where the financing party does not have time for any interest to accumulate and charge you.

The lender charging such high rates for the tax loan is not wrong as they are lending you money when you need it to pay your tax. It is up to you to determine and decide if it is worth spending so much on fees for the tax loan to pay your tax dues. If you do opt for a tax loan, it is better if you file your taxes early and pay off the tax loan as soon as possible. The longer you take to repay your tax loan, the higher will be the interest amount you have to pay.

If you opt for a tax loan when electronically filing your return, you have to select 'Refund Anticipation Loan' when answering the question of how you intend to receive your refund if your return results in a refund. This has to be answered before electronically filing your return.

The fee amount for the tax loan is determined by the refund amount, which is deducted from the refund amount before it is deposited in your account. The loan application fee is a charge of 2.75% of the loan amount, which may go up to a maximum fee of $97. In addition to this, there is also an online tax preparation fee that has to be paid when the loan is applied online.

Remember that there is a tax loan limit of $9,500 where if the refund exceeds this amount, the excess amount is deposited in the bank account within three weeks, with no extra fee. However the tax loan has to be repaid even if the IRS does not issue a full refund to you. And if you don't qualify for the tax loan service, the refund is deposited automatically in the bank in three weeks and only the $14.95 refund account fee has to be paid.

Useful Tax Resources