IRS May Say No to “Rapid Refund” Type Loans

I sincerely hope that the IRS does forbid tax preparers from offering Refund Anticipation Loans, and have said so in many venues over the years.

In my 35 years of preparing tax returns I have never offered Refund Anticipation Loans to clients, and never will.

The Refund Anticipation Loan is bad financial policy and definitely not in the best interest of a tax client. RALs are expensive, and are being pushed upon lower-income taxpayers by unethical “fast food” tax preparation chains like “you know who”.

As the fee for a RAL is often determined as a percentage of the loan principal, or refund, the greater the refund the greater the fee to the preparer. I agree with the IRS that this could cause unscrupulous preparers, whom we all agree are out there, to arbitrarily increase the refund to increase their fees.

I do believe that the majority of tax preparers are ethical and do look out for the best interests of their clients within the context of the law. Many of these ethical preparers feel that they must offer RALs to clients in order to remain competitive, even though I am sure they would rather not have to involve themselves with such usury. These preparers properly explain the true costs involved with a RAL and often offer such products at a better rate than Henry and his brother, etc.

Unfortunately, most lower-income taxpayers are tempted by the tv ads that do not say that a certain tax preparation chain will prepare a tax return properly - but only that you can walk into their office and walk out with a check! Plus, I do believe that lower-income taxpayers have the false impression that a fast food chain service will be less expensive than going to an individual tax professional.

If the IRS forbids all tax preparers from offering RALs then the ethical preparers who do so only reluctantly do not have to worry – no other preparation service or office will be able to offer them. When an ethical preparer tells a potential client that he/she does not offer RALs they cannot walk out the door and take their business down the block to someone who can.

Plus it is easier to tell a client that the IRS forbids you from doing so when asked why you do not provide RALs than to say it is a bad thing.

TWTP

I worked in marketing for 6 years for the largest financial company that offered RALs. With all that experience, I can say that I don’t like RALs and I never liked marketing them.

Will the IRS truly get rid of them? I doubt it. They threaten every year, but it never happens. In fact, the IRS actually rewarded RAL lenders several years ago by reinstating a system where they let lenders know at the time the tax return was filed whether or not that refund would be paid or not (the ‘debt indicator’ had been taken away in the mid 1990s). I haven’t worked in this business for several years, but without giving away any insider information, the reason they gave it back was because they thought RALs helped increase electronic filing, and we all know about the IRS’ goals for increasing e-filing.

The debate will keep going. We’ll have to wait and see if RALs go away anytime soon.

The real problem is that the way that the fees/interest are calculated, it isn’t always clear what the rates actually are. I also think that these companies who sell these loans overstate how long the IRS would otherwise take to send a refund. Over the past several years, I have volunteered at a local senior center to prepare taxes through IRS’ VITA program. I am sick at the number of seniors on fixed income who were convinced by these companies that it would take “months” to get their money from IRS rather than the “instant” cash through this system. With direct debit, most of my seniors who file basic returns got their refunds - interest free! - through IRS in about 2-4 weeks.

I am one of those poor people who get the EIC and receive back more than they paid in (how does that work)????

Anyhow, I went for the RAL this year, I was told by the people down the “block” that it would be here in 1-2 days. I called at the end of the first day only to be informed that the bak denied my RAL and I would have to wait 8-14 days.
I started rading on the net and I see that many many people have the same experience which is ok except that the “block” still charges you for the RAL??? in my case $82 bucks worth. What a rip.

Anyhow, I don’t complain much seeing that I paid $1800 in taxes and am waiting on a refund for $2900 (how does that work)??? someone somewhere is getting the shaft…welcome to America.

“block” still charges you for the RAL??? in my case $82 bucks worth”

I am a preparer who offers RAL. Block is not charging for the RAL the bank does. No bank will charge you for the RAL if you do not receive it. Your money will be $82 more than you expected.

Your right, the bank doesn’t charge for the RAL they just charge $20 and change for using their direct deposit account and $20+ for cutting you your check. Thats fine except that they force you into using their account to get the RAL and a day later when they tell you that you don’t qualify for the RAL the IRS already has their bank info on your return so you have to have the refund deposited into their account even though you get squat from them.

i think it should be up to the respective parties. if people are willing to pay interest (or if anyone is willing to be caught for committing fraud), that’s up to them.

this was the first year that i used the “block” and it was a horrible experience. i filed my taxes on monday and was suppose to receive my refund by thursday, well it is friday and i have no money. i went to the office and they told me the irs is holding my money and they didn’t no why and there was no way to find out. i don’t think that was right i let them take out xtra money because i needed this money back this sat and now i will not have it until the 12th. but no one in the office has anything to say about it? go figure!!!

Please help anyone. I recieved a RAL about a month ago. I got my check in one day. Now Republic Bank is calling me telling me I owe them $6000.00 because the IRS has not payed them the money yet. Has this ever happened to anyone?

I called the IRS a week ago and they said the money should be paid to the lender (Republic Bank) in a few days. Now today a week later and Republic bank calls me again saying that they haven’t received the money.

Any answers or comments is greatly appreciated

Thanks

Teeky

Kelly is right. They are in fact a loan. They are considered outstanding by the bank one week past the expected funding date. Call IRS offset line at 1-800-304-3107 to find out what happened. If you are delinquent on child support, student loans, back taxes, or any qovernment loan they can and will offset your taxes. No one else can take them.

[...] loans have already attracted a great deal of controversy. The IRS has recently noted that the loans provide a financial incentive for tax services who issue them to take improper tax positio…. Several states have passed laws requiring more disclosure as to the process behind the loans. And [...]

I am so glad to hear it! Fingers crossed that it all works.

IF YOU APPLIED RAPID REFUND HOW WILL YOU GET YOUR REBATE CHECK.