The three major tax-preparation services—H&R Block, Jackson Hewitt, and Liberty Tax—are all offering an unusual option this year: an advance on your federal tax refund, with no apparent strings attached.  

The offers are certainly tempting. But before you take advantage of them, make sure you understand how they work and what to watch out for, as we explain below.

Unlike the refund-anticipation loans that were outlawed in 2012, these new "refund advances," which are also technically loans, have no fees and do not charge interest.

H&R Block is offering advances of up to $1,250 per federal tax return, and Liberty Tax and Jackson Hewitt are both offering advances of up to $1,300 per return.

At Jackson Hewitt, you can even get a tax refund advance of up to $400 before your W-2 arrives if you can show a pay stub or other valid proof of income.

The main requirement is that you must get your taxes done by the company offering the refund advance. To apply for an advance, you’ll need to go to the tax preparer’s office. 

The timing of these offers is appealing for many people. That’s because more than 30 million taxpayers who claim the earned-income tax credit or the additional child tax credit won’t get their tax refunds until mid- to late February because of a new IRS fraud-prevention process that will focus on 2016 tax returns that claim those credits. Typically, such taxpayers file early to get their entire refunds, which are expected to average more than $3,000 this year.

When your refund finally arrives, the advance will be subtracted from it and you’ll receive the difference. If your refund turns out to be less than the advance you received, the companies say you won't need to pay back the difference. “If they don’t get a refund the loss is on us,” says David Prokupek, CEO of Jackson Hewitt.

Costs to Know About

If you are thinking about applying for an advance, here are some questions to consider:

Do I qualify for an advance? Don’t apply unless you expect to receive a refund from the IRS. "The primary reason you wouldn't qualify is if you had an unpaid debt with government, like a student loan, or owe back child support, or have an outstanding garnishment on your wages," Prokupek says. While he adds that more than 80 percent of taxpayers who already have applied for Jackson Hewitt advances have qualified, there is a risk that you pay for tax-prep services but then aren't eligible for the loan. H&R Block and Liberty Tax require you to complete and file your return before you apply for the advance.

Why are tax preparers offering such a generous deal? Because they hope that by providing you with an advance, they will also be able to generate new business from you. “Those loans give the company the ability to extract profits from consumers elsewhere,” says Adam Rust, director of research at Reinvestment Partners, a Durham, N.C., not-for-profit that offers free tax-prep assistance among other services.

A tax preparer, for example might try to sell you an audit protection service, though the IRS reports that only about 1 percent of all individual tax returns are audited in a given year.

Are there any hidden costs? "Part of the financial return on the free advances may be coming from charging more for tax preparation than might otherwise be possible," Rust says. That’s because using a tax preparer costs more than you might pay if you did your taxes yourself or used a free, not-for-profit tax-prep concern like AARP Tax-Aide or the IRS's VITA service.

Jackson Hewitt’s Prokupek says, for instance, that the typical storefront client pays around $200 to get a federal tax return prepared. Clients with simple 1040EZ forms could pay nothing, or up to $100. State forms cost an additional $49 each. 

By contrast, using tax software can be far less costly. Jackson Hewitt’s own service offers free state and federal tax prep for simple returns. IRS FreeFile allows anyone with 2016 adjusted gross income below $64,000 to use its tax software at no cost.

What if I really need the advance? If you think you’ll qualify, you can go ahead and apply for it. Just be aware that the tax preparation company may try to sell you services you don’t need. And for the future, consider changing your paycheck withholdings. Though your refund will be lower, you’ll be able to take home more money.

Where to Apply for an Advance on Your Tax Refund

H&R Block Refund Advance

Jackson Hewitt Express Refund Advance

Liberty Tax Easy Advance

Size of Advance

$500, $750, or $1,250, depending on your eligibility

$200 to $400 advance by producing a pay stub; up to $1,300 once you file

Up to $1,300

When Offer Ends

Mid-February 

Feb. 26

Feb. 28 

How to Apply

Have your return prepared and filed at an H&R Block location. Then apply for the advance. Confirmation of approval is typically within 24 hours of application. Funds will be loaded onto an H&R Block Emerald Prepaid MasterCard.

For the $200 to $400 advance, apply online. The advance will be loaded on an American Express Serve card. For the additional advance, have your return prepared and filed at a Jackson Hewitt location. Those funds will arrive within 24 hours after you file your taxes. Funds can be loaded on an Amex Serve card, or direct deposited into your account.

Have your tax return prepared at a Liberty Tax location. Your advance will arrive within 24 hours after it has been accepted by the IRS (or 24 hours after filing, if you file before Jan. 23). Funds can be loaded on a NetSpend Liberty Tax Prepaid Master Card or direct deposited.

Prepaid-Card Details

H&R Block Emerald Prepaid Master Card has a variety of fees, including $3 per ATM withdrawal.

American Express Serve card has a variety of fees but can be used free at 24,000 MoneyPass ATMs.

NetSpend Liberty Tax Prepaid Master Card has a variety of fees, including $2.50 per ATM withdrawal.

H&R Block, Jackson Hewitt, Liberty Tax