What is a Refund Transfer?
A Refund Transfer (RT) is a banking product offered by tax preparation companies, not the IRS. It allows taxpayers to pay their tax preparation fees out of their federal tax refund instead of paying upfront.
How it works
- The taxpayer files their return through a tax preparer.
- The refund is sent by the Internal Revenue Service (IRS) to a temporary bank account set up by a partner bank.
- The bank deducts tax preparation fees and any related charges.
- The remaining refund balance is then deposited into the taxpayer’s personal bank account or issued via check or prepaid card.
Key Features
- No upfront tax preparation fees
- Fees are deducted from the refund
- Offered through tax professionals or tax software providers
- Additional bank/service fees may apply
Important Note:
A Refund Transfer is different from IRS Direct Deposit.
Direct deposit sends your full refund directly to your bank account, while a refund transfer routes the refund through a temporary bank account to cover preparation fees.
- Refund transfers are available for individuals filing Form 1040, 1040-NR, or 1040-SS.
- Ensure that the bank account information is accurate to avoid delays or failed deposits.
- Refund transfers are not available for amended returns unless specifically requested through Form 1040-X.
Disclaimer: Always verify details with official Federal or State Department of Revenue Forms and Instructions.