IRS delivered a Knockout Punch to RAL

[taxmandan]

So you call the FMS - Do they readitly provide this information? Do you need the clients authorization or does this go under the public information line?

It's an automated response, if there is an offset it gives the agency and phone number that the taxpayer can call to find out the details (they already know all about it, just forgot to tell you). The Form 13 is the authorization for you to access their information.

The one that surprised me was an offset for fines on a traffic ticket. It was about $800 and the state court took their refund. Glad I called cause that wasn't something I asked him about.

[WhiteOleander]

Nope, don't fax anything unless FMS calls and wants to verify that you had a signed Form 13. Never had that happen in all my years of calling. It's like the 8879, keep it in your files for a few years.

Thank you very much. This will save so much hassle.

[MAJ]

FMS Information request...

You need to call the FMS offset to find out if there is an offset of the refund BEFORE you file the return. I usually do it before I even prepare the return, when the client indicates that they want a RAC or RAL. I haven't lost a fee yet to an offset.

So you call the FMS - Do they readitly provide this information? Do you need the clients authorization or does this go under the public information line?

[taxmandan]

Thanks for the info.

Do you mean that you don't have to fax the form like you have to fax in POA's?

Nope, don't fax anything unless FMS calls and wants to verify that you had a signed Form 13. Never had that happen in all my years of calling. It's like the 8879, keep it in your files for a few years.

[luke]

thanks

THANKS Taxmandan - could save some $ for sure!

[Edsel]

Reality Check

My brother pawned his $1200 Martin Guitar for $200. Two weeks later he redeemed the guitar for some $225. Any idiot can calculate that this interest rate exceeds 400%.

However, out state subjects all pawning to its usury laws, so the pawn shop had to live by the law. His $225 was broken down this way:

$200 Principal Redemption
$1.08 interest
$23.92 storage fee
$225.00 Total

You figure.

[WhiteOleander]

Have the client read and sign FMS Form 13, found here: http://www.fms.treas.gov/debt/top.html

Then call 800-304-3107 for an automated process to check for any government offset of a federal tax refund. Takes only a minute or so, and you have to one for both if MFJ. Ignore the fax instructions on Form 13, not necessary.

Thanks for the info.

Do you mean that you don't have to fax the form like you have to fax in POA's?

[taxmandan]

and how do I "call"?

Have the client read and sign FMS Form 13, found here: http://www.fms.treas.gov/debt/top.html

Then call 800-304-3107 for an automated process to check for any government offset of a federal tax refund. Takes only a minute or so, and you have to one for both if MFJ. Ignore the fax instructions on Form 13, not necessary.

[David1980]

However, they aren't as costly as I have heard some people say; if our clients have the proceeds put on one of our Emerald Cards (works like a debit card) the interest rate is about 36%. HSBC is the bank we use. I caution clients to only use as a "swipe" debit card at stores and get cash back (not at ATMs) to avoid all other charges. 36% is not a great rate for sure, but nothing like the 200+ % I read about.

Part of it depends upon how you calculate the interest rate. I'm not sure how HRB calculates it, or what fees they charge when they do a RAL, but it's not uncommon for the bank to calculate not including any RAL or bank fees other than the interest when they determine the interest rate, while many consumer organizations (correctly IMO) add the bank fees in when calculating APR.

For example a $1000 refund with say, 10-days til funding (so a 10 day loan) at 36% APR would cost $9.86. If the fees ended up being a $30 bank processing fee, a $20 RAL setup fee, and $9.86 of interest, the bank might calculate that as 36% interest, while a consumer group adds the $30, $20, and $9.86 and comes up with 218% APR interest.

[origun]

Don't like RALs but they aren't as bad as some of the opponents say

I am an EA working for Block so do have to deal with RALs although I discourage clients from using them if at all possible. They are more work for me (lots of paperwork) with no additional compensation and they cost the taxpayer too much. However, they aren't as costly as I have heard some people say; if our clients have the proceeds put on one of our Emerald Cards (works like a debit card) the interest rate is about 36%. HSBC is the bank we use. I caution clients to only use as a "swipe" debit card at stores and get cash back (not at ATMs) to avoid all other charges. 36% is not a great rate for sure, but nothing like the 200+ % I read about.

There are some people in desperate financial shape who really need the money to pay the rent to avoid eviction, for example, and these loans are far preferable to payday loans at storefront lenders. And, unfortunately, many of these people don't have checking accounts so can't use direct deposits.

[ChEAr$]

FMS is financial management service, a branch of U S Treasury which administers payments.
The do have a telephone in their office, but I don't know the number.

[luke]

what is FMS?

and how do I "call"?

[taxmandan]

I also question how I would get paid by the refund if the client had a huge debt to the government. Would I get paid first and then the government? I doubt it. Without the debt indicator, I would not know that I am not getting paid until it happens.

You need to call the FMS offset to find out if there is an offset of the refund BEFORE you file the return. I usually do it before I even prepare the return, when the client indicates that they want a RAC or RAL. I haven't lost a fee yet to an offset.

[taxxcpa]

Getting paid

[QUOTE=dtlee;105830

I also question how I would get paid by the refund if the client had a huge debt to the government. Would I get paid first and then the government? I doubt it. Without the debt indicator, I would not know that I am not getting paid until it happens.[/QUOTE]

The preparer would probably be the low man on the totem pole. You might need to add a fee to cover the risk involved. If you did ten returns with the payment to be deducted from the refund, probably 9 would come through and if you lost on one, the extra fee might cover most of that loss. Next year you would need to collect in cash from the guy that defaulted if he came back. He would probably switch preparers and come to some sucker like me the next year.

[FEDUKE404]

Perspective on RALs

......
HRB stock down 3%; JH down 23%. right twenty three percent.

Actually, JTX is now under $1 after trading in the high 30's as recently as late 2007. While there are other reasons for its demise, rest assured problems with its "bread and butter" high-priced RALs and associated average clientele were both major factors.

Having worked with a "couple" of store-front firms over the years, I was always amazed at what people would pay to get quick money. I finally figured, especially for the EITC folks, since they were playing with the house money anyway, walking out the door with a huge check was seen as a positive. So what if they dropped a bunch of funds in the pockets of the business owner on the way out?!?

Most rational clients now realize how quickly their refunds can arrive, especially with efiling and direct deposit. To them, tossing large amounts of money at someone just to see a refund a few days earlier than is otherwise possible is viewing as ridiculous!

I do like the IRS mention that a system is being considered for tax preparation fee payments to be made, more or less painlessly and possibly without using a third party, to the tax preparer.

FE