PayPal is introducing free federal and state tax filing for its debit card holders, allowing refunds to be deposited directly into user accounts. The move expands PayPal’s existing lineup and is intended to encourage broader engagement across the platform.
The service is a collaboration with april, a provider of white-label tax filing tools. Its AI-driven tax engine can pull relevant financial data directly from partner apps, simplifying the filing process, though it requires users to be comfortable sharing that data with PayPal.
Unlike some tax-filing platforms suchas TurboTax or H&R Block, PayPal’s offering is limited to self-guided filing and does not include access to tax professionals. Users are guided step-by-step through entering information, uploading documents, and filing electronically with the IRS. For tax-related questions, april offers an AI-powered chatbot for an additional fee.
Leveraging PayPal’s Tools
In addition to transferring money in and out of their PayPal accounts, customers can pay taxes using several flexible payment options and receive federal tax refunds through PayPal Direct Deposit.
“There are two things in play here,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “The big one is payments and deposits. When you file your taxes, you either need to pay or you get a refund. PayPal can build deposits by having consumers deposit their refund into their PayPal account. If the customer owes money, then PayPal offers ways to pay, like a short-term loan or BNPL pay-in-four arrangement.”
“The second thing is added utility,” he said. “This is another benefit of being a PayPal customer.”
Easing Privacy Concerns
PayPal has also applied for a bank charter, which would allow it to offer interest-bearing savings accounts. If approved, this could give tax filers a place to hold their refunds.
At the same time, a charter would bring additional regulatory requirements, limiting how customer data can be used for marketing and potentially easing some privacy concerns.
“They may get key demographic data from the tax company like income strata, etc.” said Apgar. “But 100% it would not be personally identifiable information [PII].”
