Don't Mess With Taxes

Many people who are having cash flow issues opt for advances on their expected tax refunds. (Photo via Unsplash+ in collaboration with Getty Images)

The 2024 tax filing season will officially start, if prior year tax calendars hold, in about six weeks. That's when the Internal Revenue Service will start processing 2023 tax year returns.

But millions of people will file as soon as they can in January, even if the IRS isn't ready. They'll use tax software or a tax preparer to get their 1040 form out of the way and to the head of the processing line.

These folks are getting refunds, and they want that cash back from Uncle Sam as soon as possible.

And some are so anxious for their refunds, they'll get a refund advance or refund anticipation loan (RAL).

Early refund options remain: Yes, these early refund options are still around, even though the Internal Revenue Service, at the urging of consumer protection organizations, did crack down on RALs (and the agency's own inadvertent condoning of them).

This quicker tax cash option gets filers at least some of their expected federal tax refund as a short-term loan based on your expected federal refund amount.

Tax advances and RALs now are primarily offered by tax preparation services, such as franchise offices of major tax filing companies. Some tax software programs also offer these loans.

Sometimes retailers also get in on the tax advance game. You've probably seen the end-of-year or early new year offers of financing to buy, at least here in the Austin area, an auto or mattresses.

And even a cursory internet search will turn up plenty of other places offering these loans.

The one commonality in all of these is that a financial institution is necessary to provide the money, either added to a special debit card or deposited in an account created when you apply.

This coming filing season, however, one less bank will be providing refund advance cash.

Civista exits RAL business: Tax Notes reports that Civista Bancshares Inc. will "step away from its income tax refund business for 2024."

Civista worked with the Santa Barbara Tax Processing Group (TPG), a subsidiary of Green Dot Corp., a financial technology and bank holding company, notes Lauren Loricchio in her story for the tax publication. That included banking services for TPG's tax refund transfer service, which allows them to pay tax preparation fees out of their tax refund.

However, after the U.S. Treasury inadvertently sent $5.6 billion in COVID-19 stimulus payments to the company, specifically into taxpayers' temporary refund advance accounts, Civista has decided to call it quits as far as the tax refund business.

That misdirected $5.6 billion is this weekend's By the Numbers figure.

Unexpected deposit problems: Taxpayers were frustrated and confused by the surprise deposit of coronavirus relief money into their tax refund advance accounts rather than into their regular accounts, writes Loricchio.

And even though a Green Dot spokesman told the Tax Notes reporter that the company didn't charge any customers to process stimulus payments, the damage was done.

Complaints poured in, with TPG facing taxpayers wanting to know why their economic impact payments went into the temporary accounts set up for standard tax refunds.

Everyone is still waiting for an answer. And Civista, according to a Securities and Exchange Commission filing, said that "the amount of information required by our regulators to 'close out' each complaint has increased extensively."

So Civista is out of the RAL business.

You also might find these items of interest:

• When real life meets tax refund loans
• Refund loans and the once-a-year 'rich'
• RALs are still around, but be sure they're worth the cost

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