If you’re looking for a way to offer more to your clients, refund transfers could be a valuable addition to your tax preparation business. Refund transfers offer a seamless solution that can streamline your clients’ tax refund process. This guide will explain the basics of bank products, how they function, and the various ways they can benefit your business and your clients.
Key takeaways on refund transfers
- Refund transfers are bank products that allow clients to receive their tax refunds while covering tax preparation fees with no upfront costs.
- Refunds go through a settlement bank, not directly to clients. Your bank partner deducts your preparation fee and other associated fees before refunding.
- Clients receive their remaining funds via their preferred method (check, direct deposit, prepaid card).
- Client benefits include no upfront costs for tax preparation, flexible disbursement methods, and the possibility of faster refunds through refund advances, sometimes interest-free.
- Business advantages include strengthening your service offerings, enhancing client attraction, simplifying the payment process, reducing the need for payment follow-ups, and differentiating your tax preparation business in a competitive market.
What is a refund transfer?
Refund transfers, also called non-loan bank products or refund settlement solutions, are away for your clients to receive their tax refunds while paying for your services without any upfront costs.With a refund transfer, your fee is deducted directly from the client’s refund once it is issued. The remaining balance is then delivered to the client through their selected disbursement method.
How does the refund transfer process work?
Understanding how the refund transfer process works helps clients see how their tax refund and tax preparation fees move through each stage of the refund process.
The process is straightforward: you prepare the federal tax return and confirm the refund amount. Then the IRS sends the money to the bank, and the bank deducts applicable fees such as transmitter or technology fees. The client receives the remaining balance in their chosen banking account, prepaid card, or debit card, with no additional cost beyond the standard refund transfer fee.
Step 1: Prepare return & confirm refund
After you complete a client’s tax return and determine that they are eligible for a refund, they can choose to use the refund transfer process.
It’s important to explain that refund transfers are entirely optional and may include certain required fees, such as transmitter fees and technology fees, in addition to the standard refund transfer fee. Many taxpayers still find the convenience valuable, since these costs are deducted from their refund rather than paid upfront.
Refund transfers and refund advances are integrated into TaxSlayer Pro, giving you the ability to offer your clients multipleway to receive their refund quickly and in the manner that works best for them.
Step 2: IRS distributes refund to the bank
Instead of receiving their money directly from the IRS, your client’s refund will first be routed through a refund settlement bank. These banks are specially authorized to deduct necessary fees from federal and state tax refunds and then distribute them to the taxpayer.
Step 3: Bank handles relevant fees
Before any funds are disbursed to the client, the bank deducts all applicable fees from the refund amount. This includes your preparation fee, which is typically sent to you through direct deposit. The bank also deducts any other required fees such as service bureau fees, the refund transfer fee, and transmitter or technology fees. All deductions are handled automatically, so the client receives their remaining balance without any added steps on their part.
Step 4: Clients receive their money
Once the bank has received the refund from the IRS and finished deducting all applicable fees, the remaining balance is disbursed to your client. Depending on the bank’s offerings, clients mayreceive their funds by check, direct deposit, or a prepaid card. The timing can vary based on the method they choose. Direct deposits typically arrive the fastest, while mailed checks or card loads may take longer.
For clients who select a check or prepaid card,refund transfers provide an added layer of security because the bank controls the disbursement process and helps prevent common issues such as lost checks or inaccurate account numbers. Overall, the process is a simple and easy way to receive their refunds and pay for their tax preparation.
How long does a refund transfer take?
Most refund transfers are completed in about 21 days, which is the typical timeframe for the IRS to issue a refund after acknowledging a processed federal tax return. The 21 day timeline is a general baseline; the IRS notes that certain returns may take longer if they require additional review, identity verification, or fall under a refund hold.
Once the IRS or state taxing authority releases the refund, the funds are deposited into the client’s temporary account with the third-party bank product. The bank partner then deducts all authorized fees, including tax preparation fees, transmitter fees, and any applicable technology fees.
After fees are deducted, the remaining balance is disbursed to the client through their selected method, which may beeither direct deposit, a check, or prepaid card.
How can refund transfers benefit your clients?
Refund transfers offer several client‑focused advantages that make the tax‑filing experience easier. Clients can file their return without paying anything upfront, choose the disbursement method that fits their needs, and often access their money sooner once the IRS issues the refund, and the bank completes the fee deductions.
Tax preparation with no upfront cost
Refund transfers are a great option for taxpayers who can’t afford or don’t want to pay your tax preparation fee upfront. The bank will handle your fee, making the payment process as stress-free as possible for your clients.
Choice of disbursement method
Different payment options mean you can cater to clients who have a bank account as well as to clients who do not have a traditional banking relationship.
Receive money sooner
Many refund settlement banks also offer refund advances. These advances are a kind of loan that allows clients to receive their money faster than they could with a traditional refund disbursement. In this case, the bank will send payment to your client before the IRS has processed and sent their refund. All of the banks that TaxSlayer Pro partners with offer refund advances, and some of these are interest-free.
How can refund transfers benefit your tax preparation business?
Refund transfers can also support your business operations by making it easier to serve clients and streamline the way you get paid.
Offer more to your clients
Tax preparation is competitive, and the more options you can offer your clients, the better. Offering refund transfers and refund advances can give you an edge over other tax preparers. You can help clients get their money faster and serve clients who can’t pay upfront.
Easier payments
Refund transfers streamline the payment process and prevent you from having to chase down late payments.
In a competitive market, differentiating yourself from your competitors is essential. Refund transfers can be an asset to your tax preparation business, helping you improve your cash flow and offer more to your clients.
