Be wary of advance offers for tax refunds

People who are looking for fast cash to pay holiday bills, unexpected car repairs or skyrocketing heating bills are being bombarded with TV ads, window signs and other pitches for tax refund advances.

Actor Jon Hamm, wearing bib overalls, laments being stuck after his old truck breaks down in a Dust Bowl setting in an H&R Block commercial.

“There’s got to be a way to get us some money fast,” Hamm’s character says. “If only there was some kind of advance we could get on our tax refund.”

The pitch is tempting, especially when the commercial says up to $3,000 could be available in an advance. Jackson Hewitt, which has its own refund advance product, noted that 43 percent of millennial taxpayers polled indicated in a recent survey that they plan to use their tax refund to pay off holiday debt, compared with 31 percent of the general population.

The refund loan products are relatively new. Consumers must dig into the details to understand what kind of loan they might expect and what’s offered.

The advance loans are made by banks — and secured by and repaid directly from a consumer’s tax refund. As a result, the size of the loans will be limited.

So if you’re owed a $3,000 tax refund, there’s no way you’re getting a $3,000 refund advance loan. Yet the big number is what consumers will see first.

Through Feb. 28, a 0 percent interest loan for up to $3,000 is being offered to current and new customers at H&R Block. If approved, H&R Block says, clients will typically have access to money the same day they apply.

Jackson Hewitt has a product that promises up to $3,200 — up from a maximum of $1,300 last year — for a 0 percent interest loan.

Liberty Tax is promoting what it calls “the largest tax refund advance offer in the industry” with its Easy Advance Loan of up to $3,250 through Feb. 28. No fees or interest are associated with the loan.

Tax refunds, of course, can be the single biggest financial payout for many consumers each year.

The demand for refund advance loans is being driven up after a crackdown to combat tax refund fraud.

The Internal Revenue Service is now required to hold back some tax refunds for those claiming the Earned Income Tax Credit or the Additional Child Tax Credit. Last year, about 15 million people who filed early in the season faced those delays.

The IRS warns tax-return filers that refunds that include such credits will not show up in a taxpayer’s bank account or debit card until at least Feb. 27 for those choosing direct deposit. But there could be more delays, if there are other issues with the tax return.

An important point: The delay applies to the entire refund, not just the portion of refund money associated with these credits.

So the IRS advises consumers not to bank on getting a refund by a certain date, especially when making major purchases or paying bills.

If you feel you can’t wait, well, you’re going to be eager to listen when someone starts talking about ways to get fast cash.

The question is, do you really need to rush?

If you’re looking at a smaller advance, say $500 or $800, could you come up with that money on your own to pay some bills? Remember that these 0 percent loans offer you money only a few weeks before your tax refund would be issued anyway.