If you have faced rejection for a tax refund advance loan, initiating communication with the concerned company is advisable to ascertain the reason behind their decision. You can also ask our free Dedicated Tax Professional with any questions you have. The issue at hand, such as an inadequate submission of the required documents, could be rectified, making it worthwhile to make a subsequent attempt. Conversely, if the underlying matter is more grave, such as an offset or credit-related predicament, it may not be prudent to pursue it further. Nevertheless, there is no cause for despair as tax season is fast approaching, and the Internal Revenue Service (IRS)
Considering this, some individuals opt for a Tax Refund Advance Loan or RAL to overcome the financial gap between the beginning of the year and the mid-to-late February period. However, obtaining an RAL is not always a guaranteed success. There are instances when you may be denied, despite your belief that you have followed all the necessary steps and even if you have had a clean track record in previous years. You can often discover the reasons behind such rejections. If you have faced rejection when applying for a loan related to tax refunds, one of the following factors might have contributed to it.
1. You need better credit.
A poor credit history should remind you that an RAL is essentially a loan. It is crucial to remember that regardless of whether your tax refund is smaller than expected or nonexistent, you are still responsible for repaying the entirety of the loan. For your tax refund advance to cover the loan, it must be substantial enough after factoring in interest rates, fees, and tax preparation expenses.
Various factors can potentially decrease the final amount you receive, such as modifications to tax laws and offsets (which will be discussed further shortly). The absence of a “debt indicator” provided by the IRS now challenges lenders to determine if any portion of your refund will be used for offset. This obscurity makes it harder to predict your ultimate refund and allows lenders to consider alternative criteria, such as conducting a credit check.
2. You’re subject to offset.
The occurrence of offset affects individuals who owe money. For quite some time, it has been the situation that if a person has outstanding debts, their federal income tax refund may be taken to fulfill those debts. This process is known as “offset” and falls under the Treasury Offset Program (TOP). Various federal obligations, such as overdue federal income taxes and defaulted student loans, can lead to offset. Additionally, states have the authority to request the interception or offsetting of federal tax refunds for state tax liabilities or debts owed to state agencies, encompassing overdue child support payments.
In the realm of financial measures, there was once a time when debt indicators held significant importance. However, despite relying on these indicators, alternative methods can still uncover certain triggers that may lead to offset. For instance, a thorough credit check could unveil cases of student loan delinquency or default, while certain localities may publicize information regarding parents falling behind on child support payments. It is crucial to note that being subjected to offset can deem an individual as a risky borrower, potentially resulting in the denial of loans on this basis.
Your Personal or Financial Circumstances Have Changed.
Various factors can impact the amount of your tax return beyond just tax laws. It’s important to consider how your personal or financial circumstances may have changed. Life events such as getting married or divorced, welcoming a new baby into the family, sending a child off to college, experiencing changes in employment status, or relocating to a different state can all impact your tax situation.
Due to a change in circumstances, your tax preparer may determine that your refund will be insufficient to issue you a loan from tax refund advance, even if you consistently receive the same amount every year.
You’re The Victim of Identity Theft.
Imagine finding yourself in a situation where your identity has been compromised. You may encounter obstacles when attempting to pass a credit check, even if your credit history needs to be impeccable. This could be due to the unfortunate reality of identity theft. Suppose someone has stolen and used your personal information to file a tax return fraudulently. In that case, it can significantly disrupt your ability to successfully file your return and claim any entitled tax refunds, potentially impacting your chances of obtaining a loan.
Suppose your personal information remains untarnished by unauthorized individuals attempting to file a tax return under your identity. In that case, it is important to note that implementing a credit freeze in response to a data breach will impact the accessibility of your credit data.
The Lending or Refund Advance Company is Dishonest.
They depend on numerous taxpayers. It is only logical that companies would arise to meet the demand when a need arises. There is a mix of integrity in the realm of companies that offer loan services. While many of these companies operate honestly, it must be acknowledged that not all of them can claim the same. Some disreputable entities, lurking in the shadows, intend to reject loan applications from the outset. Regrettably, their ulterior motives remain concealed, motivated by their desire to exploit customers through various means such as tax preparation, loan application, credit check, and miscellaneous fees. Though the IRS has taken action against some of these deceitful companies, new ones consistently emerge to take their place.
Tax Refund Advance Services Can Be Crooks.
Many taxpayers have significant dependence on them. It is only natural that when there is a demand, companies will meet that need. While numerous trustworthy companies exist in this industry, it is crucial to recognize that not all companies operate with integrity. Unfortunately, some deceitful companies intentionally set out to reject your loan application from the start while withholding this information from you, aiming to profit from tax preparation, loan application, credit checks, and unnecessary fees.
