Thursday, March 22, 2012

Getting Tax Refunds Right Away

Because I was expecting a tax refund this year, I’ve already filed and received my refund. The delay from filing electronically to having the refund deposited in my bank account was only 9 days. What does this say about the value of “instant cashback” from tax preparers?

To begin with, thanks to CRA for the fast turnaround. I’ve had some challenges in dealing with CRA, but this year has been a breeze (so far).

To those who would point out that I should arrange my finances so that I don’t have a tax refund, I say, “you’re right,” but events conspired against me this year.

On to the value of “instant cashback.” H&R Block offers to give you your tax refund immediately for a fee of 15% on the first $300 and 5% of the rest (http://www.hrblock.ca/services/benefits.asp). This would be a steep price to pay to get your money 9 days sooner. If I had used this option, my implied interest rate would have been (366/9)*5% = 203% per year (based on fictitious simple interest). Compounded out, this is a whopping 627% per year.

I realize that many people need help with their taxes and some have difficulty getting bank accounts or a reliable place to receive mail to get their refunds from CRA. But there must be a better solution than paying such a high price to get money right away. I’d be interested to know what efforts CRA is making to give people an option other than giving away 5% of their refunds.

4 comments:

  1. I'd be interested in how long the preparers at H&R Block are saying it could take to get your refund.

    IE.
    "For a small fee you can get your refund today, or you could wait UP TO a month for the government to mail it to you."

    Instantly vs a month sounds a lot better than instantly vs 9 days.

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  2. @Alex C: I'd be interested to know what they say to the customers as well. I'm sure there are cases where refunds take longer, but my guess is that my experience is fairly typical.

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  3. If you participate in a group RRSP or pension where you work, there is another way to get the instant refund.

    Did you know that you can get your tax refund right away? See your HR department about this, http://www.cra-arc.gc.ca/E/pbg/tf/t1213/t1213-11e.pdf #pension,#rrsp

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  4. @Gary: I've used a T1213 a few times. It's a great way to get your tax refund smoothly through the year. But I wouldn't exactly call it an "instant" refund.

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