In Defense of RAL

[Black Bart]

Part One:

Since this subject is so controversial (dang, I can feel the epithets flying by my ears right this minute), I'll try the seminar speakers' dodge of "warming up the audience" with a couple of jokes. Tuned in a Foxworthy on TV (don't know if there's an URL) the other night and heard a couple of pretty good ones--even if that "sort" of humor escapes you: About redneck traits (of course): (1) You think a stock tip is advice on worming your hogs. (2) You think a Volvo is part of a woman's anatomy.

Okay! Hmmm, a few chuckles and that's it, eh? Oh well, I don't expect this essay (loosely speaking) to change any minds about RALs anymore than a good talking-to by a Republican/conservative (one who's been described as a knuckle-dragging, retroactive Neandethal) to a Democrat/liberal (one who's been described as a person who leaves the room when the fight starts) will sway the other, but I think it needs to be said, so here goes.

I do RALs. Basically my argument "for" them is not that people want them (that's obvious), but that they need them. I'll explain in a minute, but first let me say that I've heard all the arguments on the "other" side, i.e., it's "the same as drug-dealing," it's "bad for their well-being (financial and otherwise)," you're "in it for the money," it's "unethical," and countless other objections. Of the three above, let me say this: I strongly disagree with the premise that's it similar to drug-dealing--RALs are no more illegal than whiskey was before Prohibition was enacted. Bad for their overall well-being? No question but that's right. Unethical--I don't think so, although you can smugly moralize from your suburban easy chair because you don't need money right this minute as the RALers do.

I've read most of the pros and cons about RALs printed on this board in the last year and a half; enough to know that many of you aren't buying any arguments in favor of them for any reason. But I'm not asking for your approval and I really don't care if you do disapprove. You can take whatever potshots you want after you read this (if you finish it), and I don't have anything else to say about it, but the truth is that I feel I'm providing a service (laughable to you--not to me/ not to RALers) for my reasonable fee (I can't speak for the bank) that these people need. I see that need. Some people don't. And that's okay with me.

One preparer on the "old board" who favored it said he had "given up" talking about it because, I assume, he realized the majority of folks were so opposed to it that there was no hope of having his view vindicated. Many preparers do reject all arguments "for" RALs totally and absolutely, regarding them and their proponents as "tainted." But, I'm going to mention some of those arguments anyway. They exist in the real world, have a real effect on people's lives, and they are real to me.

Interest rates: I think the analogy of the "outrageously excessive" percentage of interest (several hundred percent) is completely irrelevant. You're not making a long-term "loan" to finance a house--you're charging a fee to get something done in one or two days; much like a handyman charges for cutting a rick of wood, and just as you charge a fee to do a "regular" customer's tax return. What's the % you charge for doing a tax return? Okay, I'll give you an example: Guy comes in, I knock out a short form (1040A for wages and maybe some interest) in 15 minutes. I charge $45 (insert yours). For me, that's $3.00 per minute. That client maybe gets $5.25 for sixty of those minutes. Is my fee reasonable? I think so and you probably do too (no preparer seems to have a problem with that). But if you adjust your fee downward to reflect current (say 3%) interest rates; your fee will be grossly inadquate. Come to think of it; what about bank overdraft chages? $20 to $35 here; why don't you think that's "unethical"? I don't see anybody snidely referring to bankers as "drug-dealers" while they charge--what? two thousand-three thousand percent? What's it cost a bank to handle an overdraft--maybe two bucks? That's a pretty good interest rate right there.

The "social" aspect, or, "It's bad for them.": First, although it's an immediate economic problem, the RAL program has developed from a social problem. There is an underclass of people in America who are always desperate for money. We're all always close to it--if you think you're any different, you're not. "Get behind" on your bills three months and see how fast your "ole buddy" business associate gets serious with you about it (your "friends" will thin out PDQ). The difference between us and the RAL consumers is that they're always broke and in financial trouble. We live in the suburbs; they live in shacks. Yes, we can do more for them; we can try to talk to them and educate them as to what they should and can do to extract them from their plight, but, for the most part, they don't want us to do that (I guess that's the difference between liberals and me--they feel that they should tell that guy what's good for him and I think he should decide what's good for him--even if it's the wrong choice). The RALer didn't come to you because they're looking for a social worker; they came because they're asking you to help them get money immediately to pay their car payment so they can get to work next week. If you tried to talk to them about the "ethics" of the situation, they'd be baffled. You'd be an "office worker"--just another part of the problem to be dealt with, which is to navigate their way through a confusing maze of uncooperative clerks and incomprehensible paperwork to get some money right now. It's alway amazing to me to see how business-minded an uneducated slattern is when it comes to getting this done. All show and pretense is put aside. She realizes instantly any development, inference, or even slight nuance that is an obstacle to her monetary goal, in a way that she never could with, say, a matter of decorum or even table manners. Her mind is clicking like a calculator. She is focused. I say "she" because, in many cases, it's the matron or "big mama" of the family who handles all the paperwork and "official business" for the family, many of whom may be incapacitated by something, drunk, disabled, pregnant, or in jail. A qualifier here: those are some of the cases; many are just temporarily short of money for one reason or another and are not or will not become social deviants--it's just that the more colorful characters are the most striking and memorable: one comes to mind--last season I told a RAL lady we must have two phone numbers--hers and a relative's. Giving me hers, she said "Ain't no other phones; they're all livin' with me." Then, inspiration struck, and she said, "Wait! Billy's my grandson. He's in jail. Put down the number of the county jail!"

To the people looking down their ethical noses from the safe insulation of their suburban neighborhoods and equating the practice to selling drugs in shady back alleys, I suggest you examine your own motives. For instance, you think nothing of selling your time at $100 per hour to people you feel can afford it (althought they may have worked much harder and endured much more stress to get their money than a typical RAL client does). Other than out-and-out fraud, there's not much risk involved with your client, as opposed to the RALer who may or may not be claiming a foster child illegally--who can prove where the kid stayed for the past 12 months? On the other hand, I charge a RAL client $100 for me and $100 for the bank and I'll tell you it's a hell of a lot of work and worry shepherding them through this process--regardless of what somebody here once said about not doing them because it was "boring" and he would be just a "form-filler-outer." It's not boring to me and there's a whole lot more to it than just filling out an application form and collecting some easy money. Given the problems with tax software, dumb support people, balky RAL bank clerks, lying clients, the relentless (almost physical) pressure of people desperate for money, interminable phone hold-time, and a myriad of red tape; it's no walk in the park, and I feel I've earned my $100 and more. To the selective ethicist here--you would think nothing of charging $500 for stressfully equivalent non-RAL services to a white-collar client and feel you gave him a bargain (but you feel that's okay--they can stand it--no bad feelings for you there--after all, they're not "pore folks").

To be continued:

[Black Bart]

RAL - Part Two

The RAL program will end when IRS turnaround time (as discussed by Snag in the "E-refund speed" thread just below) improves to a speedy and "free" two-day norm. In the meantime, nobody can cure RAL clients' problems because, for the most part, they don't want them cured. They aren't going to start putting their money in IRAs and "investing wisely" just because you tell them it's best for them. They'll humor you by listening to your "church-talk," but they'll be right back next year for a quick refund. They can't even have bank accounts--all money has to be carried on their persons because if they put it in the bank, a relative would clean it out immediately. As to cost, they really don't care what it costs--I could double, even triple, my fees and it would scarcely make a dent in traffic. That's largely due to the ever-escalating EIC (clients feel that it wasn't their money in the first place). In their viewpoint, it's an opportunity created by the government for them to get "free" money. They don't look at it as an ethical or moral dilemma as we do--to them it's just a "government" program. It exists, just as the wind and the seasons exist, and, if they can use it to their advantage, they do so. They have no opinions about it, other than to be baffled by the astounding, if not insane, notion that anybody would pay them $4,300 to have fun and kids. If anything, they maybe wonder--will wonders never cease?

A person has an economic need. That need exists because of unwise past choices. Everybody, including you and me, has to pay for their choices (there's nothing noble about being poor--it's just a state of being). I'm charging them what it's worth to me to satisfy that need. I don't see anything wrong with that, even if you do. I know what the opposition party is going to say about that and it's this: If a drug addict needs drugs, do you supply them or do you refrain from dirtying your hands? Well, I don't know about drug addicts; I only know about RALers. I know they both need and want money now. Before RALs began, people offered to give me fully half of their refunds if I would advance them some money--I didn't advance any. Also, I didn't get into RALs (or EF for that matter) overnight--I just started a couple of years ago. EF surfaced around 1990 I believe, and I didn't want anything to do with it at the time (inertia, complacency, etc.). Sometime around '94-'95, Block launched their "Rapid Refund" program. Before that I had 1,000 customers. Three years later, I had 500. People constantly bombarded me with questions such as "Why don't you offer the loans like Block and Jackson-Hewitt?" A perception developed in the community that I was "the old tax guy that's behind the times" and I'll tell you--it's not a good feeling to hear that, even indirectly.

So, finally, I decided that if I was going to remain a viable force in the local tax business, I was going to have to comply with the first rule of business, which is "You have to keep up with the times." There may be regional differences in your neighborhood and mine. As I've pointed out many times, this is a "poor" state where minimum wages are quite common and government programs and sources (SS, welfare, SSI, disability, AFDC, etc.) are heavily depended upon. Many people receive social security benefits of no more than $400-$500 per month because this was once a "company-town," owned and controlled by a single large employer whose retirement benefits averaged perhaps $200 to $400 per year, not monthly. I've been practicing for over thirty years. In that time, I've done one AMT return. That's how low the average wages are. I've never been asked to do an estate or gift tax return. Your town may be different. And, too, I know the feeling of being in need of immediate money. At one time in my life, long ago, I needed $5,000 immediately. To get it, I sold a lot--now worth about $50,000. Today, in that same situation, knowing its later worth, I would still sell it to prevent a larger economic catastrophe. That's the reality these people are faced with. They can't undo their past mistakes; they have to try and prevent new ones and they don't have the luxury of long-term cures.

Is it right? I don't know. I know that some of them squander their money on unnecessary junk. But many of them do not; they need it for some practical purpose just as you or I might. Can they ever "straighten up" their economic situation? I don't know the answer to that either, but to justify my dealing with them--I'll say this to you: if a man tells me that he must have money in two days or he'll lose his car and, therefore, his job; I don't feel justified in saying "I'm going to give you a good talking-to about putting money back for a rainy day." If your principles prevent you from "helping" (I call it that-you may not) him, then that's your prerogative.

This is not a good ending for me, as one should always try to have the last "say" in order to "win" the argument, but I feel that I should give my opponents a plug for balance (or "the angels their due," if you will). Should we refuse to participate and try to counsel them, one at a time, and each try in our own small way to discourage it and put them on the right track? Another "I don't know." It seems hopeless.

Still, it brings to mind something I once saw on TV--a kid was picking up little starfish, beached as far as the eye could see, and throwing them back into the sea. A man walked by and said, "Kid, there's a million of them! You're not making any difference." And the kid said, as he threw one back, "It made a difference to that one!

[Joe Btfsplk]

RALs

I scanned the comments above and will try to be not so lengthy.
The main argument for RALs is that the recipient is in desparate need of the money immediately.
They probably are, but they have been just as desparate all year long, so why is it so urgent in this particular two-week period that their need becomes a life-or-death matter?
What about the other 50 weeks of the year?

If RALs were outlawed, these RAL people would manage to struggle thru the extra few days before receiving their well-earned EIC money from the pockets of the rest of society.

The only people who really benefit from the RALs are tax preparers and banks that fleece the poor suckers.

[Joe Btfsplk]

RAL providers

As much as I oppose RALs, I think the problem is with the legal system that allows it. If a tax preparer is mainly dealing with EIC clients, he would soon go broke if he did not offer RALs, so I can see why it might be necessary. I suppose I can take the high road only because I can afford it and can manage without the EIC/RAL crowd as clients.

[Snaggletooth]

Down and Out

Bart, the Jordan family is like most -- some of us are model citizens, some of us are the "slugs" of society - meaning they are the RAL and EIC crowd if not in jail. At various times in my life I have vascillated between both ends - like a ball in a pin-ball machine.

For a three-year period 1986 - 1989, I looked up at the world from the bottom of the toilet. If I had any credit to begin with I would have been a candidate for bankruptcy. Before that period it was "Good morning Mr. Jordan, it is nice to have you in our bank today." After that period, the banker would snurl up his nose at me on the street and look the other way.
They didn't have RALs back then, but that would have been considered manna from heaven.
My little tax practice was the only employment to be found, so the rest of this time I spent moving furniture and other minimum wage jobs. Much of this time was spent sleeping in the back room of a biker club house for $5 a night.

It was SO bad that one Sunday morning I didn't have enough cash in my pocket to buy a newspaper so I could check out the want ads. I happened by a trash can and saw a big, thick NASHVILLE TENNESSEAN on top of a pile of trash. I was truly elated to get a free paper. I strumbled my way through the headlines section, the sports section, the cartoons, etc. but as fate would have it, there was NO section for the employment ads. The guy who had bought the paper obviously wanted it for the same purpose and had thrown the rest of it away. That's how bad it was -- many people didn't know it because the stock market was booming under the Reagan economic "miracle." Booming because companies were laying off people and closing plants to boost profits.

During this awful period, I came to understand why people lie and steal, and also why those in the comfort of their suburban homes and fat-cat white collar jobs look down their nose at the less fortunate economic element. Thanks to the good fortune of being born to parents with proud values, I hopefully never succombed to stealth and related behavior, but I now know how much easier it is if you are confronted with conducive conditions.

Slowly as time evolved, I realized most of the problem was really myself. There are such things as true victims of circumstance but not many. All of us can blame "circumstances" but we have to deal with them. Bart, among your quotes you must be familiar with Julius Caesar where Shakespeare writes "The fault, dear Brutus, lies not with our stars but with ourselves." The problem was that I was living with a "RAL" mentality. Living for the moment - not only financially, but occupationally, domestically, and every other way possible. I can tell you the lessons I learned during this period set the course for the rest of my life. I'm certainly not rich by anyone's standards, but I have walked away from the poverty of that era and am a better person because of it.

The discussion rages on as to whether our white-glove profession should dirty our hands with RALs as if this was tainted money. Fact is most preparers find RALs just as labor-intensive as any other part of the job, and it is the bank portion (who are getting all their paperwork filled out by the preparer) that we should find disgusting. I would say this board is split about 50-50 in their support of RALs. But I would hope those of us holding my position are not looking down their noses at RAL-participating preparers as if this is some sort of moral sin.

Those of you who perform RALs freely admit that you know it is really a rip-off of your customers. Those of us who do NOT perform RALs also freely admit that we are losing business because of it. Also our reluctance does not convert the mentality of the EIC crowd to suddenly make them investment bankers -- it only drives them across town to get their taxes filled out.

[Gretel]

Amen

Bart and Snag. I also believe it's not our part to judge anyone but to be compassionate and help in any way we are asked to help. So RAL people ask for this help and we can make an attempt to educate them but surely should refrain from any judgement and give freely what is not ours in the first place.

None of us is any better than someone else. I also know a lot of financial struggle, having started all over again several times. When I immigrated 10 years ago I didn't even have a credit rating. Definately worse than having a bad one. When I started my business five years ago, I, being just by myself now, earned so little money that I received a couple of hundred dollars EIC. And you better believe it was much needed.

So, let's not judge someone else, not even wanting to know anything about that persons story. And it's the richer business people who pay minimum wages to their employees and then looking down on them for being poor.

[Unregistered]

So RAL people ask for this help and we can make an attempt to educate them but surely should refrain from any judgement and give freely what is not ours in the first place.

Whether I think they should get the money or not, It is MY MONEY as a taxpayer. There is no such animal as government money.

[Randolph]

QUOTE: "The main argument for RALs is that the recipient is in desparate need of the money immediately."

Obviously if that is all you got out of that very lengthy posting, you are right; you only scanned it.

Of course, that is what critics of many things frequently do. They look at a quick overview of a problem (scan it) and then post their own conclusion without regard to all of the facts.

You definitely are entitled to your opinion, but isn't it a little unfair to render opinions when you only "scanned" what the person had to say.

I am not a fan of RAL's myself, but I am at least willing to listen to what he had to say. I still may not agree with everything or even most of what was said, but I think he presented the most well thought out argument for RAL's that I have heard. He didn't change my mind about offering RAL's but he unquestionably mellowed my thinking toward those who do.

[Gretel]

Government money

Whether I think they should get the money or not, It is MY MONEY as a taxpayer. There is no such animal as government money.

I wasn't talking about government money.

[Unregistered]

I wasn't talking about government money.

So where does EIC money come from? The Tax Fairy?

[Bird Legs]

To Unregistered

The EIC money comes out of your pocket, and mine. The federal governmnet is just the
collection and distribution agency.

[Joe Btfsplk]

. Anytime someone posts a lengthy message, I will scan it rather than read it in detail unless it contains some kind of critical message.

I quickly realized that he was defending the RAL with the usual arguments: the client really need the money in a hurry, if I dont offer RALs someone else will offer them, etc.

He probably had a dozen good justifications for offering RALs including the BIG reason anyone would offer them: FOR THE MONEY.

As I commented later, if someone needs the RAL money bad enough then I can understand their participation in this rip-off. If I needed it bad enough I would probably convince myself that it was of great benefit to my clients who could not wait a couple of weeks after waiting the other 50 weeks of the year for their well-earned EIC.

[Joe Btfsplk]

Eic

The EIC is an "entitlement." Those who are entitled are entitled to get their hand in your pocket up to their elbow since you have no right to the money you earned.

The EIC was a misguided attempt to get people off welfare and into work. Most recipients, however, continue receiving the EIC year after year, hilding a large part of their true income thru the underground economy.

Occasionally, I've seen EIC recipients who probably deserved a helping hand. One woman, a Mexican immigrant, got the EIC one year and had to answer all kinds of questions to justify it. The next year she made over $ 50,000. In another case, a truck driver hurt his back helping unload. He couldn't work and was in pain for about a year and got an EIC. His back got better and he went back to work earning over $ 50,000 the next year.

To their credit, neither of these two wanted an RAL.

The only client I ever lost because he wanted an RAL was one that I was just looking for an excuse to dump.

[Black Bart]

Snag, Gabriele, Randolph

Thank you for your support.

Randolph: Your post was a refreshing breath of fresh air. Why don't you come back as a member and share your thoughts?

Your temperament, Blessed are the peacemakers...MATTHEW 5:9, is a much needed buffer of Ye are fallen from grace. GALATIANS V. 4.

[Joe Btfsplk]

Ral

Black Bart offers RALs because his practice lost 50% of the clients to HRB and JH--and most of us would do the same if our practices depended on RALs.
I don't blame someone if they are forced into the RAL business to avoid going broke. I would probably be an RALer myself if I had to offer RALs to stay in business.
Apparently Black Bart has a different type clientele. I've had very few requests for RALs, so I can afford to eschew that rip-off.

The real culprit is not preparers who are forced into it by their clients. It is the preparers who push them onto clients who would still be clients if you did not offer them. It is also the banks who offer them. Also the government which perpetuates this rip-off by making it legal.