Options To Your Tax Preparation
If you are curious about bank products as a tax preparer or taxpayer, you came to the right place to better understand how this service helped both parties in small and great ways. There are many parts to a bank product, or also known as a financial product by some, and it can often seem complicated and intimidating for some to even considering it as an option. But in truth, understanding a bank product is not as bad you may make it out to be, and could be an untapped market that you as a tax preparer could be missing out on. I will be going over the perks for a bank product in POV of a Tax Preparer, and that of a Taxpayer.
Simply put, there are two kind's of services associated to a bank product: Refund Transfers; and Refund Advances (Loans).
For the Refund Transfer, it is a just a way for the taxpayer to pay their tax preparer, and the tax preparer will get their fees. This is great for both the taxpayer and the tax preparer, if a taxpayer doesn't have the money on hand to pay for their taxes to be done, they can use their refund to properly pay their tax preparer. This is a multi-billion dollar market, and major franchises such as H&R Block and Liberty Tax heavily market their Refund Transfer services. Many taxpayers rely on the Refund Transfer to for their taxes being completed.
An important note, a tax preparer should never under any circumstance use the Form 8888 to receive their their fees from their clients refund, that form is NOT a bank product and if a tax preparer uses that form to collect their fees from a refund, their EFIN can be revoked and the tax preparer permanently blocked from ever acquiring a new EFIN. If you are a taxpayer, and your tax preparer uses the Form 8888 to collect their fees, consider this an immediate red flag. Bank products on the other hand are transparent and authorized by the IRS to properly disburse the amounts between all of the relevant parties, using a bank product protects both a tax preparer and taxpayer.
The Refund Advances are an application to get an advance on their refund from the IRS before the IRS actually sends out the taxpayer's refund. This advance on the refund is treated as a loan, and is paid off at the time of when the refund is transferred by the IRS. This is a great option when the taxpayer's refund is needed much sooner, they can apply through the tax preparer to receive this loan. IRS processing of a refund can also take several weeks just for a Direct Deposit, but Refund Advances do not depend on that being funded for your client to receive the loan.
Refund Advances are not the same thing as a Refund Transfer, because it serves a whole separate purpose in helping the taxpayer get a portion of their refund early. If a tax preparer wants to collect their fees too, they would have to do both a Refund Transfer and Refund Advance (Loan) in the bank application. An additional point worth mentioning, the Refund Advances have a high interest rate for being provided a loan, the reason is because the idea revolves on that the refund will pay for the Loan once it transfers. Banks are also very aware of the higher risk involved with these kind of loans, so it is a great option for many, but there are high fees involved with this kind of loan.
Those are the basics between the Refund Transfer and Refund Advances of a Bank Product. In short, taxpayers can pay their tax-professional with their refund and tax-professionals open themselves up to a massive market opportunity. And taxpayers can get a loan on their refund, while the tax-professional provides more options to their clients. These bank products are not a perfect solution for everyone, but as a tax preparer, it helps to know what is in the market and how it benefits you and your clients.
If you're a taxpayer looking for alternative solutions for your tax preparation needs, please feel free schedule a commitment free meeting with the link below.
