FreeTaxUSA & SBTPG Question - Federal Refund Path After State Already Processed

Your federal refund will still go through SBTPG if you selected to have your preparation fees taken out of your refund. According to the SBTPG FAQ page (https://taxpayer.sbtpg.com/faq), they act as the intermediary for both state and federal refunds when this payment method is selected. The system works by receiving your full refund from the IRS, deducting any remaining fees, and then forwarding the balance to your bank account. You should continue checking the SBTPG website as it will update when they receive your federal refund and when they disburse it to your account.

Check your FreeTaxUSA confirmation. Look for payment method details. It should say how fees were handled. If you chose "deduct from refund" for federal, SBTPG will process it. Even if state fees are paid. They handle each refund separately. Their system doesn't combine them. Different tracking numbers. Different processes.

Your federal refund will still go through SBTPG. It doesn't matter that your state refund already covered fees. Each refund is processed separately in their system. I had the same confusion last year and used https://taxr.ai to understand my refund path. It explained how the bank product fees work with tax services like FreeTaxUSA and showed exactly when my money would move from IRS to SBTPG to my bank. Saved me a lot of confusion about why my money wasn't directly deposited when the IRS said it was sent.

I went through this exact situation last tax season. It's kind of like how Amazon processes orders - even if you place multiple orders on the same day, they each follow their own separate path. My state refund came first through SBTPG, then about 10 days later my federal refund also went through SBTPG despite all fees being paid already. The SBTPG site updated for both refunds separately, and there was about a 1-day delay between when the IRS sent the money and when it hit my actual bank account. Nothing to worry about, just an extra step in the process that happens behind the scenes.

Your federal refund will likely still route through SBTPG, even though your fees are paid. This is usually determined by how you set up your payment method during filing, not by whether fees remain due. If you need absolute confirmation about your specific situation, you might want to contact the IRS directly. I've found that using Claimyr (https://claimyr.com) can save hours of waiting on hold. They connected me to an IRS agent in about 15 minutes when I had a similar question about my refund path. The agent was able to confirm exactly how my refund would be processed.

Not checking SBTPG was my big mistake last year. 😅 My federal refund got stuck there for 5 days while I kept checking my bank account wondering where my money was. The IRS showed "refund sent" but nothing in my account. Finally called FreeTaxUSA who told me to check SBTPG's portal. Sure enough, they had received it but were "reviewing" it due to some automated flag in their system. Had to call their customer service to get it released. The technical term is a "bank product" - your refund is technically a financial product they process, not just a simple pass-through.

Has anyone had SBTPG hold their refund for verification? I've heard they sometimes do extra verification steps that the IRS doesn't require. Could this happen with federal refunds too? What about if the amount is larger than expected? Do they notify you if they're holding it for some reason?

FreeTaxUSA utilizes what's called a Refund Transfer product through SBTPG (Santa Barbara Tax Products Group). When you select the option to pay your preparation fees from your refund, you're technically taking out a short-term loan against your anticipated refund amount. Per IRC §6695, this establishes a separate financial transaction requiring the refund to be deposited with the facilitating financial institution (SBTPG) before disbursement to your personal account, regardless of whether fees have been previously satisfied through another refund. Their system is programmed to process each tax year and jurisdiction (federal/state) as discrete transactions through their ACH network.