How To Get A Fast Tax Refund Without a Refund Anticipation Loan

This tax season there will be fewer options for a refund anticipation loan (RAL), but that doesn't mean taxpayers who need their refund quickly can't get it. In fact, most consumer advocates say the shortage of pricey RALs will turn out to be a positive for consumers.

While getting an RAL might seem easy, it comes at a pretty steep price. Especially when you consider there are lower cost, and even free alternatives.

For example, Taxpayers with a bank account can get their tax refunds in 8-15 days with e-filing from the Internal Revenue Service (IRS) and direct deposit. Taxpayers without a bank account can get a fast refund by e-filing and having their refund deposited to a prepaid card, including any existing payroll or prepaid card that the taxpayer already has. 

Plenty of options

"There are plenty of options for taxpayers to get quick refunds without paying for a costly RAL," ssaid Chi Chi Wu, staff attorney for the National Consumer Law Center.  "Of course, taxpayers should compare costs and consumer protections when choosing among these options."

Taxpayers without a bank account should also consider opening an account to receive their refund. 

"Getting a big refund is the perfect time to open a savings account and start a nest egg," said Jean Ann Fox, Director of Financial Services for Consumer Federation of America.  

Prepaid card options specifically targeted for tax time will be offered by some tax preparers or tax software companies in 2011, such as the Get It Card from Advent Financial Services or the H&R Block Emerald Card.  A few even permit taxpayers to have the costs of tax preparation deducted from their refunds.

Free assistance

Low-income taxpayers have a number of options for free tax preparation, including Volunteer Income Tax Assistance (VITA) and AARP Tax-Aide sites. Choosing a VITA or AARP Tax-Aide site saves taxpayers both the cost of a RAL and the cost of a tax preparation fee.  Many VITA sites also offer services to help open a bank account or get a low-cost prepaid card.

For taxpayers willing to do it themselves online, there are a number of websites that allow taxpayers to prepare and file their taxes for free, such as the IRS Free File program and the I-CAN! E-file site.

Fewer RALs

These options provide for a speedy refund and don't carry the costs of an RAL. Using the most recent data  available from the IRS, NCLC and CFA calculate that about 7.2 million taxpayers received RALs in the 2009 tax filing season, for tax year 2008.  This represented a 14 percent drop from the 8.4 million taxpayers who took out a RAL in the 2008 filing season.

It also means more taxpayers are saving money. NCLC cites Republic Bank's posted charges of $61.22 for a RAL of $1,500, which translates into an APR of 149 percent.  If the refund exceeds $1561.22, the taxpayer will be charged another $29.95 when the remainder of the refund arrives in the form of a refund anticipation check (RAC), for a total of $91.17 in fees. 

On the other hand, taxpayers who qualify for free tax-preparation assistance can file electronically using the IRS's e-file and have their refund direct deposited to a bank account in eight to 15 days. If you file as soon as you receive your W-2 form from your employer, you'll have your refund that much faster.