Tax Preparer Payment Options - Getting Paid from Client's Refund vs After?

Hey there! Ur looking for a Refund Transfer (RT) - it's legit but has fees. Most tax prep software offers this (TurboTax, H&R, etc). Client's refund goes to temp bank acct, ur fee gets deducted, then rest goes to client. Totally legal but they'll pay ~$40 extra for the convenience. IMO better to just have them pay u directly after filing - saves them $$ and less complicated for everyone!

You need Form 8879. This authorizes e-filing. You need Form 8888. This allows refund splitting. Client must sign both. You'll need a third-party processor. They handle the bank accounts. Most charge $35-45. Make sure client understands fees. Be transparent about costs.

I've been researching this same issue and have a few questions: • Is this considered a Refund Anticipation Check (RAC)? • Does the client need to disclose this arrangement on their return? • What happens if their refund is less than expected? I tried calling IRS directly to clarify but was on hold forever. Finally used Claimyr (https://youtu.be/_kiP6q8DX5c) and got through to an agent in about 15 minutes who confirmed this is a legitimate practice but requires proper documentation. Maybe try them if you need official clarification?

I tried this last year and OMG it was such a headache! 😤 The bank processor took FOREVER to release the funds, and my client kept texting me asking where their money was. I had no control over the timing! Then the processor took an extra fee that wasn't clearly disclosed, and guess who the client blamed? ME! Never again! Why would anyone choose this complicated route when they could just Venmo you after they get their refund?

I was in your exact situation last tax season when I started preparing returns for friends and family. I ended up using a tax transcript analyzer at taxr.ai to make sure I wasn't missing anything about refund transfers. It helped me understand exactly what would show up on both my client's and my own records if we did the direct deduction. Ultimately, I decided to just have clients pay me directly - much cleaner and no extra fees for anyone. The transcript tool was super helpful though for understanding how the IRS views these transactions.

I once had a client insist on paying me from their refund. Set everything up properly with a bank product, dotted all my i's, crossed all my t's... and then their refund got offset for back child support! 🙃 Guess who never got paid for 3 hours of tax prep work? This guy! *points thumbs at self dramatically* Now I only accept payment upfront or through direct methods after filing. The refund deduction option is like playing tax preparer roulette.

I need to caution you about potential consequences of refund transfers. Here's what can happen: 1. First, the IRS may flag the return for additional review if they suspect RAL (Refund Anticipation Loan) activity. 2. Next, if you're preparing many returns with refund transfers, it could trigger a pattern that leads to preparer audits. 3. Then, if you're not registered as an Electronic Return Originator (ERO) with the IRS e-file program, you may be violating regulations. 4. Finally, some states have specific laws about tax preparation fees and refund-based payments. I understand wanting to ensure payment, but these complications can create more problems than they solve.

I *think* what you're looking for is a Refund Transfer product, but they usually cost around $39-45 for the client, which seems kind of ridiculous for what's essentially just a convenience fee. Last year, I charged a flat $150 for basic returns and just had clients Zelle me after I showed them the completed return but before I filed. That way, they could see exactly what their refund would be, and I didn't file until I got paid. Worked perfectly for about 30 clients, and nobody had an issue with it.

Why complicate things when there's a simpler solution? I've been preparing taxes for friends and family for 6 years now. I just have them sign a simple one-page agreement before I start that states my fee and payment terms. Isn't that more professional anyway? Then I prepare the return, review it with them, and collect payment before filing. No third parties, no extra fees, no waiting for the IRS. If they don't have cash on hand, that's what credit cards are for, right?

As someone who's been preparing taxes for several years, I'd strongly recommend avoiding the refund transfer route. The complications far outweigh the benefits - you're dealing with third-party processors, additional fees for your client, potential delays, and as others mentioned, the risk of offsets completely derailing payment. I've found the most successful approach is requesting payment upfront for basic preparation work (maybe 50%) and the remainder upon completion but before e-filing. This protects both parties - you get compensated for your time, and they get to review everything before final payment. Most clients understand this is standard business practice, just like any other professional service. The peace of mind is worth way more than the perceived convenience of deducting from their refund!

I've been doing taxes for my neighbors for the past 3 years and learned this lesson the hard way! My first year, I tried the refund transfer route thinking it would be "easier" for everyone. What a nightmare! Between the extra fees, delayed processing, and one client whose refund got intercepted for an old tax debt (leaving me unpaid), I quickly realized it's not worth it. Now I just ask for payment when I hand over their completed return - before I hit submit on the e-file. Most people are totally fine with this since they can see exactly what their refund will be. I use a simple invoice app on my phone and accept Venmo, Zelle, or cash. Way cleaner, no third parties involved, and I sleep better at night knowing I'll actually get paid for my work! Sometimes the old-fashioned way really is the best way.