RALs

[Rick Creighton]

I've being doing taxes for 20 years and have a pretty good business going on. I have a friend in the business who started doing refund anticipation loans. He's making a ton of dough in a short amount of time early in tax season by filling out a couple of forms for his clients. I'm not real comfortable with doing those, but all that money for so little work and zero risk is sure attractive. If I don't do the loans, somebody else will and all that will happen is I lose business.

Any opinions?

-rick

[Scarecrow]

RALs

Run, run, run, run, run, run, run, run, run, run, run, run, run, run, run, run, run, run, run, run, run, run, run, run, run, run, run, run, run, run, run, run, run, run, run, run, run away from RALs as fast as you can.....

You are not in the Mafia, so stop trying to act like the Mafia. RALs are nothing more than legalized loan sharking. And some day they will all come crashing down to put a black eye on our business.

I'm sure Enron accountants thought of justifications for their immoral behavior too, before they tainted the accounting industry.

[S T]

Rals

I have also been in the tax business for over 20 years. Somehow, I just can not bring myself to offer the RALS to clients and I am surprised that IRS has continued to allow this practice.

I have based my business on client repeat and referrals and try to build a lasting relationship. I don't seek or prepare returns for walk-in clients seeking their refunds in less than 72 hours and lining my pockets! Your friend will probably not see those same clients next year.

I have seen the paperwork on RALS, and the percentage rate including other fees is a very high APR to process these anticpated loans. Most of the clients are below the poverty income level and to think that I would be taking about 25% to 33% of their refund in fees, is really disgraceful.

I can not in good conscious offer these to clients even though it would increase my net profits. I do have to sleep at night! You will continue to meet your same clients each year and your business will grow, even though more slowly, and you will reap the long term rewards!

Efile with direct deposit will still get the client their refund in about 2 weeks. They just have to have a little patience which costs them little!

Sandy

[Bjorn]

Ral Response

While in Walmart a former customer told me they went to Block because I did not offer RALs.

I lost the customer because I did not offer the RAL service.

I don't encourage the product but do offer it due to customer demand. They money and hassle is pretty big for what you do.

It is sad that when people get a free lunch {EITC} they, sometimes, don't respect the money because it was not earned. I'd bet a large percentage of RAL customers are EITC and this type of short term decision making is also used in other areas of life making it difficult for them to ever to self supporting.

I think America would be a better place if demand waned for this service. However, America is a free country which means people have the right to make informed decisions even if I personally would not make the same choice. They even have the right to make foolish decisions, which nearly every tax professional would agree a RAL is a foolish decision.

[Chief]

RALs

Bjorn:
I agree with you Bjorn. We know rals are a rip off for our clients and we tell them that, but they are free to make their own decision. I have a daughter who went to JH three years ago and paid them over $300 for a $3000 ral. Most of that money went to the tax preparer. That is where I feel the greatest rip off takes place.
I will continue to offer RALs so my daughter can get one at mainly the bank cost. I had another client who moved here from Oklahoma. She needed her money pronto to rent an apartment and pay for auto tags and purchase an economical car. I got her refund overnight for a cost of about $80.00 which she was happy to pay to get the money pronto. Knowing that she was a poor credit risk I was able to have my prep fee deducted from her refund and automatically deposited into my checking account. This I feel is an advantage of RALs if you have the client who cannot pay the fee up front. These kind of clients need to be served but are usually poor credit risks.
I recognize that the bank fees are steep but this is the price individuals with poor credit ratings pay. They also pay a premium for any kind of credit, borrowing, or pay day advances. This is just a fact of life that we are unable to change. Refusing to do their tax returns is no way to change the system. Write to your government officials but I am afraid that the financial lobbyists are pretty strong in regard to this issue. Who pays? the little person with no voice.

[Rick Creighton]

Principles?

"It is sad that when people get a free lunch {EITC} they, sometimes, don't respect the money because it was not earned."

But not so sad that you won't take a bite out of that welfare payment before it ever gets to the folks, right? It makes it more obscene that tax preparers and bankers are siphoning welfare money off the top before it ever gets to the people it's supposed to be helping. I'll bet there are enough peoplle along the way and enough justification that all welfare payments could end up getting sucked up before they ever got to the recipient.

"We know rals are a rip off for our clients and we tell them that, but they are free to make their own decision. I have a daughter who went to JH three years ago and paid them over $300 for a $3000 ral. Most of that money went to the tax preparer. That is where I feel the greatest rip off takes place.
I will continue to offer RALs so my daughter can get one at mainly the bank cost."

Rip off rip off rip off. your words. "We know rals are a ripoff for our clients..."

But you will continue to offer them.

I guess if we're going to sit around and wait for somebody else to do the right thing first, the right thing will never, ever, get done.

[Vic Ferrari]

Ral

I think the best we can hope for in this topic is: Agree to disagree.

[Chief]

ralS

There are costs related to tax return preparation and they are reimbursed to the preparer in feesthat areset. There is no such thing as a free ride for anybody. The same thing is true for bank fees that are set by these institutions. The tragedy is when exhorbant charges are made for either.

[Snaggletooth]

Thumbs down to RALs

Boils down to whether you want to be known for looking out for client's best interest or not. There is little argument amongst us that they are yet another way for banks to suck even more money from the illiterate and wanton.

But is the RAL evil? or immoral? or should we care? I'll leave the classification of this to other folks, as I don't believe everyone who offers these is immoral. In my own mind, the question is how you want your business to be portrayed.

Advertising "instant" refunds like HRB and JH is just a corporate money grab, and we all know it. Telling your clients a RAL is a bad idea and letting them make a choice is another approach.

Part of my tax service is counseling with people about personal finance problems, as they often come up in the preparation of their taxes. I don't get paid for this, so many of you will consider this to be a waste of time that I could use making money. To add insult to injury, many of these people only give me the courtesy of listening and then go out and do what they want to anyway. But some of them listen, and those who do get a clear understanding of how banks, insurance companies, mortgage companies, credit cards, 401k custodians, etc. make money, and I give them alternatives to these methods when they became exorbitant. All of them should get paid for what they do, but many of their plans to suck wealth from the ignorant is hidden.

In short, for me to offer RALs would make me the biggest hypocrite on earth. I understand not all of you operate like I do, and must approach the RAL question on its own merits.

Regards, Ron Jordan