When considering tax refund products such as refund advance loans or anticipation checks, experts recommend taking the time to read all the details before signing up. A report from the Treasury Inspector General for Tax Administration revealed that approximately 16% of American taxpayers collectively paid over $842 million in fees for their 2023 refunds, with about 96% of those taxpayers utilizing refund anticipation checks (RACs) and only 4% opting for refund anticipation loans (RALs).

These financial products tend to attract people eager for their refunds who might not want to endure the wait for the IRS to process and issue payments. The report highlights that while the seven major tax return preparer firms, which represent nearly 80% of the market for these products, are generally compliant with relevant regulations, there is often insufficient clarity about the fees involved. In many cases, individuals found themselves needing to sift through multiple pages to uncover essential cost information, which may not be prominently displayed.

For the upcoming filing season in 2024, RAC fees were reported to range between $25 and $55. The average refund amount for taxpayers using these checks was $3,841, making the RAC fee about 1% of the total refund. In comparison, those using a fee-based RAL received an average refund of $6,696. Consumers should also be aware that some refunds may be distributed via prepaid cards, which often come with various fees including those for out-of-network ATM withdrawals, caution the Consumer Financial Protection Bureau.

Additionally, many taxpayers are eligible for free tax preparation assistance from IRS-certified preparers. The CFPB recommends that rather than resorting to costly advance loans or checks, taxpayers can often receive their refunds from the IRS within 10 to 21 days, suggesting that a short wait could lead to significant savings. Resources for finding free tax preparation help include visiting irs.gov for information on free tax return preparation, AARP.org for locating Tax-Aide services, GetYourRefund.org for online assistance, and MyFreeTaxes.com for self-preparation with guidance.