Tax refund-related products are financial products based on taxpayers receiving a tax refund. Financial institutions offer a variety of financial products to taxpayers based on their refunds. Such products include a Refund Anticipation Loan (RAL) which is money borrowed by a taxpayer from a lender based on the taxpayer’s anticipated income tax refund, and a Refund Anticipation Check (RAC) which directs the refund to a financial institution which disburses fees and the balance to the taxpayer. The IRS is in no way involved in or responsible for RALs, RACs or other financial products. Authorized IRS e-file Providers (Providers) that assist taxpayers in applying for a tax refund-related financial product have additional responsibilities and may be sanctioned by the IRS if they fail to adhere to the requirements below.
The Provider must:
- Ensure taxpayers understand that by agreeing to a refund-related financial product they will not receive their refund from the IRS as the IRS will send their refund to the financial institution;
- Advise taxpayers that RALs are interest bearing loans and not a quicker way of receiving their refunds from the IRS;
- Advise taxpayers that if the financial institution does not receive a Direct Deposit within the expected time frame for whatever reason, the taxpayers may be liable to the lender for additional interest and other fees, as applicable for the RAL or other tax refund-related product (see explanation below);
- Advise taxpayers of all fees and other known deductions to be paid from their refund and the remaining amount the taxpayers will actually receive;
- Secure the taxpayer’s written consent as specified in Treas. Reg. § 301.7216-3(a) to disclose tax information to the lending financial institution in connection with an application for a refund-related financial product;
- Ensure that if it is also the return preparer that it is not a related taxpayer (within the meaning of §267 or §707A) to the financial institution or other lender that makes a RAL agreement; and
- Adhere to Fee Restrictions below and Advertising Standards.
There are no guarantees that the Department of the Treasury deposits refunds within a specified time or in their entirety. For example, it may delay a refund due to processing problems or, it may offset some or all of the refund. The Department of the Treasury is not liable for any loss suffered by taxpayers, Providers or financial institutions resulting from reduced refunds or not honored Direct Deposits, causing it to issue refunds by check.
Providers may not base their fees on a percentage of the refund amount or compute their fees using any figure from tax returns.
When assisting a taxpayer in applying for a tax refund‑related product, the Provider may charge a flat fee for that assistance. The fee must be identical for all customers and must not relate to the amount of the refund or the tax refund-related product. The Provider must not accept from a financial institution for any service connected with a tax refund-related product a fee that is contingent upon the amount of the refund or the financial product.
The IRS has no responsibility for the payment of any fees associated with the preparation of a return, the transmission of the electronic portion of a return or a tax refund-related other financial product.