How to Borrow Against Income Taxes
- 1). Find a tax preparer. Some will allow you to receive your return upon filing your taxes. Look for a professional tax service that offers a loan program (see Resources below).
- 2). Examine loan documents. If you must borrow against your return, ask your tax preparer to provide you with his company's schedule of fees for loans before you allow him to complete your taxes. Make sure the interest rate and finance charge are acceptable. Generally, loans against tax returns come with an interest rate of 7 to 10 percent and a finance charge of 10 to 15 percent, depending on the size of the return, when you wish to receive your loan and company guidelines. If the loan terms are not acceptable, give yourself enough time to find another company with a stronger loan program.
- 3). Complete and file your taxes. To borrow against your tax return, you must first complete your income taxes. Sit down with a professional tax preparer at least three weeks from the April 15 deadline. Some preparers may have cutoff dates for when their loan programs become unavailable. Have your W-2s, 1099s, receipts and other paperwork with you. Your preparer will complete your taxes and file them with the IRS.
- 4). Sign loan documents. After your taxes are complete, you will be given a few options for receiving your loan. You may receive your funds immediately. Or, your loan may be available in a few days. After you've completed a short loan application, your tax preparer will submit it to a bank. If the bank approves it, you will be issued a check in the amount of your return less the tax preparer's fee, interest and finance charge. You must also sign a letter of direction. This letter will authorize the IRS to send your tax returns to your tax preparer so the company can use it to repay your loan.
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