Early Tax Refund Options Could Trap Your Cash
Don’t be fooled into thinking you’re not getting a loan — because you really are.


You could be itching to get your tax refund earlier — and we don’t blame you. As of early February, IRS tax refunds are bigger, with an average payment of $2,065. That’s over 18% higher than this time last year.
But the IRS can have lengthy processing times, causing you to search for a faster way to get your refund. Last season, 22 million taxpayers found a quicker possibility in early tax refund options.
These strings-attached alternatives will get you an early payment but may also lead to fees, upcharges, and interest rates as high as almost 36%.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Be aware. Know what you’re signing up for, or you may risk owing money on your federal tax refund.
Early tax refund choices for your return
Before we get into the data, let’s look at the definition of refund anticipation loans and checks. Both products operate differently to give quicker access to your tax refund amount.
- Refund Anticipation Loans (RAL). Taxpayers borrow money based on the expected refund amount, with attached interest and fees. Funds go directly into the lender’s account when the IRS disburses payment.
- Refund Anticipation Checks (RAC). The taxpayer’s refund is deposited into a temporary bank account, which the tax preparer uses to write a check (or give a prepaid card) to the taxpayer. Effectively, this option is a preparation fee loan as tax preparer costs are deducted before payment is made to the taxpayer.
In both cases, a third party receives the payment and the taxpayer pays service fees before receiving a smaller refund. While RAC has an average fee of $40 (which might be small for some) the real danger lies in refund anticipation loans.
After all, what happens if you take out a loan and then the IRS reduces your refund or the anticipated amount is smaller than expected? Well, you’re now on the hook for money you no longer expect to receive.
Are early refunds for your taxes legal?
It may sound surprising, but these early tax refund options are legal products. Many taxpayers have used these sometimes costly alternatives to get their refunds early, as recently reported by the Treasury Inspector General for Tax Administration (TIGTA):
- Last tax season, U.S. taxpayers lost over $842 million in early tax option fees.
- One provider offered a 35.5% interest rate plus a finance charge of 7.5% on all loans.
- Loan periods were as short as three months (repayment after the due date would result in late fees and interest).
This means that taxpayers who sought tax relief may have instead signed up for a financial headache, potentially owing more money than was initially due to the IRS. Plus, as of the TIGTA report date, some who chose refund loans were still waiting for payment from the tax agency.
How to get an IRS tax refund early
Fortunately, you may get an “early” refund without signing up for a loan. Here are just a couple of ways to expedite your federal tax refund:
- File early. The busiest part of the filing season is late March to mid-April. If you file earlier, you can stay ahead of the curve and may see a shorter processing time on your payment.
- File electronically and direct deposit when you can. Avoiding the post office during the busy tax season could get you a refund faster and help protect your check from tax refund mail theft.
Remember: Do your research. If you need a tax preparer, find a reputable one. If you want an inexpensive tax preparation service, you can try an IRS service like VITA, which gives eligible taxpayers free tax counseling and preparation services.
Stay informed. And don’t fall for something that sounds too good to be true.
Related Content
- IRS Income Tax Refund Schedule 2025: When Will Your Refund Arrive?
- Federal Tax Refunds Are $526 Bigger This Year: Here's Why
- Direct File 2025 Offers A New Way to File Taxes for Free
- Legislation Cracking Down on IRS Tax Refund Mail Theft Advances
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Kate is a CPA with experience in audit and technology. As a Tax Writer at Kiplinger, Kate believes that tax and finance news should meet people where they are today, across cultural, educational, and disciplinary backgrounds.
-
Social Security Is Taxable, But There Are Workarounds
If you're strategic about your retirement account withdrawals, you can potentially minimize the taxes you'll pay on your Social Security benefits.
By Todd Talbot, CFP®, NSSA, CTS™
-
Serious Medical Diagnosis? Four Financial Steps to Take
A serious medical diagnosis calls for updates of your financial, health care and estate plans as well as open conversations with those who'll fulfill your wishes.
By Thomas C. West, CLU®, ChFC®, AIF®
-
Ask the Editor: Reader Questions, April 25 — 529 plans
In our latest Ask the Editor round-up, Joy Taylor, The Kiplinger Tax Letter Editor, answers questions related to 529 plans.
By Joy Taylor
-
Ask the Editor: Reader Questions, April 18 — Amended Returns
In our Ask the Editor: Taxes, April 18, round-up — Joy Taylor, The Kiplinger Tax Letter Editor, answers questions on amended returns, mortgages and deductions.
By Joy Taylor
-
How Many IRS Commissioners Have We Gone Through This Year?
IRS Who were the former IRS commissioners, and why did they resign? Find out how IRS turnover can impact your taxes.
By Kate Schubel
-
Which Generation Pays the Most Tax in the US?
Tax Burden Polls show that most people feel like taxes are unfair. But which age group bears the brunt of the tax burden in the United States?
By Kelley R. Taylor
-
Tax Day 2025: Don’t Miss These Freebies, Food Deals and Discounts
Tax Day You can score some sweet deals on April 15 in some select restaurants like Burger King, Shake Shack, and more.
By Gabriella Cruz-Martínez
-
Tax Time: Does Your Kid Influencer Owe Taxes?
State Tax Some minors are making big money on social media. Here’s how to know if they need to file taxes.
By Gabriella Cruz-Martínez
-
Ask the Editor: Reader Questions, April 11 — IRAs, RMDs and PTPs.
Ask the Editor: Taxes, April 11, 2025 — Joy Taylor, The Kiplinger Tax Letter Editor, answers questions on Roth IRAs, RMDs and other retirement accounts.
By Joy Taylor
-
Trump Plans to Terminate IRS Direct File program
Tax Filing The IRS Direct File program was piloted last year in 12 states and has since expanded to 25. But will it last under the Trump administration?
By Gabriella Cruz-Martínez