Posted on

5 Reasons Why Your Tax Refund Anticipation Loan (RAL) Application May Have Been Rejected

As the final week of January arrives, taxpayers are eagerly preparing to open the doors of tax season. With anticipation of potential tax refunds, many individuals are eagerly awaiting the opportunity to file their taxes especially for RAL for some.

In order to ensure fairness in the tax system, certain taxpayers are not immediately eligible to receive a tax refund. According to the law, the Internal Revenue Service (IRS) is mandated to withhold refunds that are associated with the Earned Income Tax Credit (EITC) and the Additional Child Tax Credit (ACTC) until at least February 15.

Taking into account weekends and the President’s Day holiday, taxpayers can start receiving their EITC/ACTC related tax refunds at the end of February. Specifically, the last weekday of February marks the beginning of this process. It is important to note that the message on the IRS phone line predicts that these refunds will start arriving just after, during the initial week of March.

When it comes to tax season, many people rely on Refund Anticipation Loans (RAL) to help them bridge the gap between filing their tax returns and actually receiving their refunds. In certain instances, you may face rejection despite believing you have followed all the correct procedures and have not encountered any difficulties in previous years. If you have experienced the disappointment of being denied a loan related to tax refunds, it is possible that it was due to one of the following causes.

Make sure to locate your dedicated tax professional that will walk you through the RAL application from start to finish for free and minimize the chances for rejection.

ral tax rejection

1. You need better credit for RAL

It is important to remember that an RAL functions as a loan. Regardless of whether your tax refund is smaller than expected or if you are still waiting to receive a refund, the entire loan amount must be repaid. Your tax refund should be substantial enough to cover the loan repayment after considering interest rates, fees, and tax preparation costs.

Various factors can affect the total amount you receive from applying for RAL, such as modifications in tax legislation and offsets (which we will discuss later). The Internal Revenue Service (IRS) has discontinued the provision of a “debt indicator,” which previously informed lenders in advance if a portion of your refund would be allocated for offset purposes.

In light of these circumstances, determining your ultimate financial outcome becomes increasingly intricate while simultaneously increasing the lender’s propensity to consider alternative factors such as conducting a credit evaluation.

2. You Need to Have the Proper Documents for RAL Application

The deadline for banks, employers, and other entities to provide tax forms is usually January 31. Many individuals eager to prepare their taxes might be tempted to arrive at their tax preparer’s office with only their final paycheck.

In order for tax preparers to e-file their tax returns, it is crucial that they receive forms W-2, W-2G, and 1099-R, if applicable, as mandated by the IRS. Failing to provide these necessary documents may render your tax preparer unable to justify extending your loan.

3. You Made Too Much Money for RAL 

Let me clarify this for you, as I can understand your confusion. The majority of the substantial tax refund checks pertain to refundable tax credits such as the EITC and the ACTC. These credits are typically subject to a “completed phaseout amount,” which signifies the income threshold at or above which no credit can be claimed.

You may find yourself ineligible for tax credits if your income exceeds a certain threshold. It is important to keep in mind that your tax preparer is well aware of this. Consequently, if your income aligns differently from the requirements for such credits, you may receive a smaller tax refund that may not even be substantial enough to consider taking out a loan (considering the accompanying fees such as tax preparation fees).

4. You’re Maxed Out.

Despite being current on all your credit card payments and other financial responsibilities, having a limited credit history can still lead to being denied. When your credit cards and other loans have reached their maximum limit, a lender may hesitate to offer you more credit. To avoid uncertainty about your credit status, it is advisable to check your credit report at the present moment.

According to regulations, individuals can receive a complimentary copy of their credit report annually from the three primary credit reporting agencies. The process can be initiated through an online platform. To confirm their identity, individuals must furnish their full name, residential address, social security number, and date of birth.

5. You Needed to Make More Money.

At the heart of the “earned income tax credit” lies the concept of “earned income.” The credit calculation is directly tied to earned income, excluding unearned income. Consequently, individuals who depend on dividends and interest cannot benefit from this credit, as it is exclusive to those who earn a living through their work.

When you face a shortage of income, it is important to consider the potential impact on your eligibility for various tax benefits. Specifically, your ability to claim refundable tax credits may be restricted. Remember, your tax preparer is well aware of this situation, and failing to meet the required income threshold could lead to a denial.

Posted on

Most Asked Questions about Refund Anticipation Loans (RAL)

What You Should Know About Tax Refund Anticipation Loans

On January 29, 2024, taxpayers will welcome the opening of tax season with mixed emotions. Some eagerly anticipate tax refunds, while others bear the weight of anxiety. In such situations, some taxpayers resort to seeking refund anticipation loans (RALs). Understanding the workings of these loans and the potential disqualifications is crucial. Here’s what you need to know.

Offered by certain tax preparers, an RAL (Refund Anticipation Loan) is a type of loan that taxpayers can opt for if they are anticipating a tax refund. It’s worth noting that this loan must be repaid, as it falls under a contractual agreement. By entering into an agreement with a lender, usually a bank, individuals can receive an advance on their projected tax refund in exchange for a commitment to repay the loan. One of the main advantages of an Refund Anticipation Loans RAL is quick access to cash, even if the tax refund itself is not disbursed for several weeks.

As Monday ushers in the start of tax season, receiving your tax refund immediately might not be possible. The law stipulates that the Internal Revenue Service (IRS) must wait until mid-February to distribute refunds to those who claim the Earned-Income Tax Credit (EITC) or the Additional Child Tax Credit (ACTC).

Refund Anticipation Loans

Considering typical processing times for banks, as well as weekends and the upcoming President’s Day holiday, it is anticipated that the earliest refunds related to EITC and ACTC will be accessible on February 29, 2024. This is, of course, assuming that the refunds are made through direct deposit without any complications. Is worth mentioning that February 29, 2024, marks the final weekday of February. It is important to note that the recording on the IRS phone line advises taxpayers to expect these specific refunds to become available starting from the initial week of March.

In the process of facilitating RALs, the IRS maintains a clear separation. Lenders are not supplied with information by the IRS, nor are taxpayer tax refund amounts guaranteed. Consequently, every year, I am bombarded with inquiries regarding RALs.

Here’s a quick rundown of some of the most common, together with my answers:

If RAL was denied, does that mean I won’t get my tax refund?

Despite being coordinated or completed at the same location, keeping the Refund Anticipation Loans (RAL) application separate from the tax return preparation is necessary. Turning down the RAL will not impact your eligibility for a tax refund, as it will still be payable to you even if you have yet to receive any funds from the lender.

However, it is important to note that you might still find yourself responsible for various fees associated with loan applications, such as credit check fees and miscellaneous fees. This is a crucial aspect to consider when searching for a reliable RAL provider, as some may prioritize earning revenue from these charges rather than genuinely assisting you in obtaining the loan.

Why would I be denied of RAL?

When it comes to getting turned down for an RAL, there are a variety of factors that could come into play. One of the most frequent causes of this rejection is the lender deeming you too much of a risk.

When considering the size of your tax refund, you must be optimistic that it will cover the loan once interest rates, fees, and tax preparation fees are deducted. Otherwise, you must rely on your finances to cover the remaining amount. Furthermore, alterations in tax laws and offsets, where the government reduces your refund due to outstanding debts like child support or student loans, can impact your overall financial situation.

The lenders, banks, and tax preparers are now in the dark when it comes to the IRS, no longer providing them with the much-needed “debt indicator.” This indicator is used to give them an advanced heads-up on whether your refund had any portions earmarked for offset. With this crucial information gone, it becomes increasingly more work for lenders to gauge your bottom line accurately. As a result, they now have to rely on alternative criteria such as your credit history or salary to decide on whether to grant you a loan.

My Refund Anticipation Loan status says “Your application has been received but has not been accepted at this time.” What’s going on?

An RAL is subject to the lender’s due diligence requirements as with any loan. The level of due diligence may vary depending on the lender, ranging from a simple credit check to a more extensive process, particularly for larger loan amounts. If it has been several days since your application, it is worth seeking an update from the lender or the tax preparer who facilitated the loan.

Got denied for an RAL, will I got my tax papers back?

You can expect to have your documents returned to you, but the timing may vary. Your tax preparer may have a specific schedule for sending out copies of tax returns, and yours might simply not have been sent out yet.
In the event that this scenario arises, it would be wise to provide the individual in question with a brief period of time before taking further action. Nonetheless, it is within your rights to insist on promptly returning your information forms if the tax preparer fails to complete the necessary preparations. To learn additional strategies for handling an uncooperative preparer, get in touch with your dedicated Tax Professional to help you from start to finish.

Posted on

Risks with RAL or Rapid Tax Refund Loans

The concept of a Refund Anticipation Loan (RAL) revolves around allowing taxpayers to borrow money based on their projected income tax refund. While banks are the primary lenders for these loans, tax preparers and occasionally CPAs extend this financial service to their clients during tax return preparation.

Often referred to as an immediate or rapid tax refund, these loans may give the impression that they originate from the State or the Internal Revenue Service. Nonetheless, they are actually short-term loans that come with steep expenses. In many cases, the tax preparer and the lending institution receive commissions based on the calculated tax refund. As a result, the refund anticipation loan (RAL) is typically lower than the actual amount of the tax return refund.

In compliance with the regulations set forth by the CBA, Certified Public Accountants (CPAs) who provide Refund Anticipation Loans (RALs) are obligated to provide consumers with written disclosures. These disclosures must include the exact monetary compensation the CPA will receive for facilitating the loan. It is mandatory for these disclosures to be made prior to or during the referral process to the lender, as well as any other activities undertaken by the CPA to aid in the loan process.

When seeking assistance from a CPA for tax preparation and contemplating an RAL, it is advisable to collaborate closely with a tax professional. Please consult with a PriorTax dedicated Tax Professional about the process of filing for an RAL for free and the estimated time it takes for the State and the IRS to process and issue your complete income tax refund.

refund anticipation loan RAL

RAL is Paying to Borrow Money.

Non-bank lenders offer Refund Anticipation Loan (RALs), which are brief loans lasting between 7 to 14 days. These loans are backed by the borrower’s estimated tax refund. After deducting applicable fees, individuals who opt for RALs receive immediate cash equal to their expected tax refund.

Instead of taking an identical approach, individuals willingly accept a deal where they commit to paying an interest rate that, if calculated as an annual percentage rate (APR), could reach three digits. Typically, a financial institution establishes an exclusive account designated for the purpose of receiving the taxpayer’s refund from the Internal Revenue Service (IRS). Upon receipt of the refund, it is utilized for repaying the borrowed funds.

Hidden Risks by Getting Refund Anticipation Loan (RAL).

RALs, similar to other forms of loans, carry inherent risks that should be carefully considered. These risks include the possibility of facing a greater financial burden if your refund request is rejected, delayed, or falls short of your expectations. While RALs may seem manageable in the immediate future, their long-term implications can be financially crippling if unforeseen circumstances arise with your refund. Over time, this can result in accumulating significant debt that has a detrimental impact on your credit rating.

RAL (Refund Anticipation Loans) Wont Be Cheap

When acquiring an RAL, it is essential to be aware of its various associated fees. These fees typically encompass a loan application fee that can reach up to $100, a tax-preparation fee averaging around $40, a check-processing fee of approximately $20, a “peace of mind” guarantee provided by your tax preparer ensuring the refund specified on your tax form (often amounting to $100 or higher)

The fees associated with RALs can quickly add up, putting a dent in your wallet. When considering RALs, it is important to note that they often come with exorbitant interest rates. These rates usually begin at 36 percent or higher.

Refund Anticipation Loan (RAL) applications are available from various venues.

When consumers look for “instant refunds,” they often turn to businesses specializing in tax preparation and filing. However, it’s important to note that RALs, or refund anticipation loans, can also be found in various other establishments such as car dealerships, boat showrooms, and furniture and electronics stores.

Variations in RAL Filing

Instead of relying on costly RALs, it is wise to explore more affordable options available. You can save considerably by exercising patience and opting for the IRS to send your tax refund without any charges. When you e-file your tax return and choose direct deposit for your refund, you can experience a speedy IRS refund cycle that can be as short as 8 days.


By taking a short pause of just a few days or weeks, you have the opportunity to pocket hundreds of dollars in savings. If you still need to take advantage of it, think about initiating the process of setting up a checking or savings account. This will allow you to receive your advanced tax refund effortlessly through direct deposit.