Refund transfers can be a great addition to your tax preparation, but the key to getting all the benefits is understanding what they do. Everyone knows how frustrating it is to wait on a tax refund check to arrive and then clear the bank before they can use it. What many people do not realize, though, is that there are other ways to get your refund distributed.
This year, instead of dealing with another agonizing wait to get your tax refund, consider a refund transfer. This guide will explain everything you need to know about what they are, how they work, and how you can benefit from them.
What is a Refund Transfer?
- Refund transfers are also referred to as bank products and refund settlement solutions.
- Taxpayers can use refund transfers to set up FDIC-insured refund accounts to receive the refunds that result from filing their taxes.
- The Internal Revenue Services (IRS) then deposits their federal income tax refunds into these temporary accounts, usually within 21 days.
Why a Refund Transfer is a Good Idea
No Upfront Costs
Get Money Faster
Different Disbursement Methods
Not Always the Best Option
How Do You Set Up Refund Transfers?
Once a taxpayer’s tax return is completed, they can elect to use the refund transfer process.
Rather than getting the money from the IRS, the taxpayer’s refund will be routed through a refund settlement bank. These banks are authorized to deduct necessary fees and then distribute the funds to the taxpayer.
The bank will take care of deducting the preparation fees from the refund, as well as any other associated fees such as refund transfer, transmitter, and service bureau fees.
Once the bank has deducted all the necessary fees, they will distribute the refund in the taxpayer’s preferred form. Depending on the bank, taxpayers can receive their refunds in the form of direct deposit, prepaid card, or even check.
Refund Transfer Hang Ups to Watch For
Incorrect Direct Deposit Information
Wrong Personal Information
