Everything You Need to Know About Getting Your Instant Tax Refund

Understanding instant tax refunds: not your typical loans 

Think of an instant tax refund as a very short-term loan or advance (which is why they’re sometimes referred to as “tax refund loans” or “tax refund advances”!).

Here’s the download on these loans and where to snag one. 

What an instant tax refund is

An instant tax refund is a way to fast-track your refund and bypass the wait for the CRA to process your return. Essentially, you’re getting a short-term advance that’s backed by your expected refund. 

Where to get an instant tax refund

So you’re sold on the idea of instant tax refunds. But where can you get one? There’s good news: Many of the larger tax preparation companies in Canada offer instant refunds as a service. 

Just keep in mind when you’re looking around that the typical term for this service in Canada is “instant tax refund” or “instant refund,” and not “a tax refund loan.”

How an instant tax refund works

Let’s say you’re wrapping up your tax return with a tax preparer who offers instant refunds. Here’s how to get yours:

1. Your tax professional crunches the numbers and estimates your expected refund.
2. If you’re eligible for an instant refund and choose to proceed, your tax preparer gives you your refund immediately.
3. They then submit your return to the CRA electronically.
4. Once the CRA issues your refund, the money goes directly to your tax preparer to repay the money they advanced you. 

Sounds like a win-win scenario, right? But in many cases, it may not be as win-win as it appears.

Knowing the price of instant gratification

It’s time to talk about the elephant in the room: the cost of your instant refund. Because while getting your refund right away can be pretty sweet, it does come with disadvantages, one being a hefty price tag.

The fees of instant tax refunds, explained

The good news is, the federal government puts a cap on the fees that can be charged for an instant tax refund:

• 15% on the first $300 of your refund
• 5% on the remaining amount of your refund

Suppose your tax refund is $1,500. You’ll receive $1,395 as your instant refund. Here’s how the math works out:

• 15% of the first $300 = $45
• 5% of the remaining $1,200 = $60

Your tax preparer gets to keep $105 ($45 + $60) of your expected refund, leaving you with $1,395 ($1,500 – $105) as your instant refund. 

What about GST/HST and PST?

The maximum GST that your tax preparer can charge on an instant tax refund transaction is $1.50. Depending on the province or territory you’re in, you might also be charged PST or the provincial portion of HST. (This is in addition to your tax preparer’s fee.)

The real costs involved in instant tax refunds

Does a $105 fee for an instant $1,395 refund sound like a good deal? Let’s compare this fee to a credit card’s APR (annual percentage rate), which is the yearly cost of borrowing. 

Sidenote: Your card’s APR is typically higher than its interest rate, since it includes both the interest and other fees. Most credit card APRs are between 12% and 25%. 

To make a fair comparison, we’ll convert the instant refund fee into an equivalent APR:

Let’s say you’d get your refund in one month if you didn’t go the instant refund route. For a $1,500 refund, you’d pay $105 to get $1,395 instantly—similar to paying $105 for a one-month advance. If you paid $105 every month for a year, that’s $1,260 ($105 x 12 months).

Here’s how to calculate the APR based on these numbers: 

APR = (total yearly interest ÷ amount borrowed) x 100

= (1,260 ÷ 1,395) x 100 = 90%

That’s a whopping APR compared to what you’d be paying if you borrowed the same amount from your credit card!

Looking to beat the CRA’s processing time

Is the cost of an instant tax refund worth bypassing the wait for the CRA to process your return? Let’s look at theCRA’s processing timeline:

• If you file electronically, the CRA aims to process your return within two weeks (that’s probably less time than it takes some of us to get our tax documents organized).
• If you’re a traditionalist and file a paper return, the CRA takes a bit longer—around eight weeks.

So while waiting for your refund can feel like forever, it’s not as long as you might think, especially if you file electronically and have registered for direct deposit. 

And the CRA provides several convenient ways to check the status of your refund. You can log into My Account on the CRA site for secure online access to your tax return information, use the MyCRA app, or call the CRA directly.

Weighing the pros and cons: Is an instant tax refund worth it?

The allure of immediate cash can be tempting, especially if you’re feeling financially pinched (and really, who isn’t these days?). But like any financial decision, it’s a good idea to weigh the pros and cons. 

Advantages of instant tax refunds

• Immediate cash. If you’re facing an unexpected expense or simply need the money right away, this can be a lifeline.
• No credit check. Unlike traditional loans, instant tax refunds or tax refund advances don’t require a credit check—definitely a pro if you have a less-than-perfect credit score.
• Convenience. You’re already at the tax preparer’s office: a one-stop shop for filing your return and cashing out your refund.
• Potential savings. The fee charged for an instant refund includes the tax preparation cost, so in some cases opting for an instant refund could save you money. 

Disadvantages of instant tax refunds

• High fees. As our APR comparison illustrates, the cost of an instant tax refund can be quite high.
• Less money overall. You’re essentially paying a fee to borrow your own money, which means less money in your pocket.
• Potential debt. If your actual refund is less than estimated, you could end up owing money to your tax preparer.
• Qualifying amount. Your tax preparer may require a minimum refund amount to qualify for an instant refund.

Exploring alternatives: other ways to bridge the refund gap 

If the idea of losing a chunk of your tax refund to fees makes you uncomfortable, you’re not alone. Here are some alternatives: 

• Savings. Your savings can be a temporary financial buffer—just be sure to replenish your funds when your refund arrives.
• Low-interest credit. Use a low-interest credit card or line of credit for your short-term financial needs. Pay off the balance when you get your refund. 
• Budgeting. Cut back on spending temporarily by reducing expenses or delaying certain purchases until your refund is issued. 

Taking charge: your money, your choice

Remember, it’s your money—which means you get to call the shots. Just make sure you’ve got the facts (because knowledge is power!): weigh the costs, consider the pros and cons, and go with the decision that makes the most sense for your wallet.