Don't Wait For Your W-2--

[Black Bart]

GET A "MONEY NOW" LOAN TODAY!

That's the sign up at our local Jackson Hewitt office today. They're doing a land-office business.

Good grief, this is getting to be a competitive racket. I keep trying to do tax work and they keep trying to make a banker out of me.

At Christmas-time they advertised "Get up to $575--Holiday Express Loan Program." Now, the above scheme (to pay for that Christmas loan I suppose).

Even worse; now I'm going to be forced into the retail business. Somebody brought an H&R Block "Refund Rewards" booklet by the office and asked what I was offering with my RALs. It's one of those books of discount coupons from various businesses--20% off a tune-up at Pep Boys--free breakfast at Holiday Inn--free Bowflex upgrade--$2 off Payless Shoes--$5 off Kids R Us--Chuckie Cheese, Lenscrafters, Midas, and on-and-on.

Oh well, as a bird-of-the-feather, guess I better start flockin' with them. Wonder if there's a tax biz equivalent to that Ace Hardware chain of associated independent dealers? If there is and they can negotiate a discount on Budweiser, I'll blow 'em away.

[Snaggletooth]

Check Stub

Bart, do you mean JH is electronically filing with check stubs, meaning they don't have to wait on a W-2?

Or do you mean they are in effect "loaning" them the money prior to E-filing anything?

There is a world of difference in these two...

Thanks, Ron J.

[Don B]

I was under the impression that the IRS didn't take e-files until after 1-12.

[wv112]

They aren't e-filing the returns. They are just loaning upfront money.

This could turn into a big mess for them.

[ecb34691]

They are loaning $550, $1200, or $1900, If the bank approves, they get a check or cash card now with the fees withheld $50 of the total tax prep fees, 3% of the amount and $45 bank fee. When the w-2's come, they finish the return as a RAL and the remainder of the tax prep fees and finance charge is witheld. People with ADP payroll service can have their w-2's downloaded in the software just like Turbo-tax.

[Armando Beaujolais]

They are loaning $550, $1200, or $1900, If the bank approves, they get a check or cash card now with the fees withheld $50 of the total tax prep fees, 3% of the amount and $45 bank fee. When the w-2's come, they finish the return as a RAL and the remainder of the tax prep fees and finance charge is witheld. People with ADP payroll service can have their w-2's downloaded in the software just like Turbo-tax.

It's no secret I've never liked these things, so just for disclosure sake I'm biased. I hate to keep screaming "slippery slope," but aren't these just consumer loans like any other consumer loans? Couldn't these folks go down to the loan company and take out a regular consumer loan right quick?

Is this O.K. to do? If it came from a regular loan the cost of the loan would be market price? Because it comes through a tax professional hooked up with a bank it costs many times more?

It just seems wrong.

[Donanita]

Yea

and somebody can get really burned if the refund doesn't come through due to back child support,student loans,etc.Most of these people know if they will have their refund held by the IRS but don't care and after the get their money just try and find them.

[Black Bart]

All good points, folks.

Snag: No, they're not filing a tax return. It's just an advance against their tax return refund.

Don B.: It's not an e-file.

wv112: Yes, they are loaning upfront money and it may indeed be a horrendous mess when it's all said and done, although it seems like they'd have had enough foresight to do some field surveys about the pros and cons before launching the program.

R2D2 (sorry; I mean ecb34691): I didn't know all that. Do you work for JH?

Armando: I don't like it either, but what's to be done? IRS apparently isn't interested. As far as going to a loan company and taking out a regular consumer loan, that's usually out ot the question as most of those customers' credit rating is generally shot to pieces. I assume it's okay to do it--surely JH lawyers would have already checked out the legality. But, yes, it is a loan and I don't know how they get around the usury laws that would normally restrict triple-digit interest rate percentages.

Don: Yeah, it looks like they could get burned. When doing a RAL, the IRS furnishes info to the banks as to whether or not the person owes the government some money. Here, I don't see how they could get that info without actually filing the return. As far as finding them after they've gotten an advance, I'd say they probably only loan a small percentage of the total--that way it would still be worthwhile to return and file in order to get the lion's share of the refund. Also, I talked to a lady that applied for one of the Christmas loans and she said JH denied hers because she only had one tax season's "history" (one year as a client) with them. So, apparently they're being somewhat careful who they loan to--maybe restricting it to "old hands" only.

[taxmandan]

Refund verification

and somebody can get really burned if the refund doesn't come through due to back child support,student loans,etc.

Not really a problem, the US Treasury has a toll free phone number to call to find out if there will be any offset of the refund. Client signs permission and the preparer can check in less than 2 minutes whether there is an offset, doesn't say what it is, but that there will be no refund. By now, the client's are aware of this and few of them really try for this loan if they have knowledge of an offset. I don't do RALs but I do let clients pay my fee from their refund, so I check for offsets.

[ecb34691]

To Bart.
Yes I'm with JH as a GM type. Been there 10 years. I don't like RAL's either, but the client does. The two banks SBB&T and HSBC have "pre-screened" some of last years clients and my office did 25 today with 100% acceptance. Some places in the country had only had a 25% acceptance rate today. These expected refunds today were from $2-7K with alot of EIC. (Remember EIC is up to $4300 this year.) Our s/w gives a screen for the client which shows all possible refund options with the refund from IRS directly to the client to the various bank products they can chose from and all associated costs.

[Black Bart]

ecb34691 & taxmandan

ecb: Thanks for the reply. I was curious as to what kind of money they were putting out, although as independents we can never compete with programs like that. I've never really "talked" to somebody who worked for the "other guys" and am quite interested in your viewpoints if you'd care to share some--if not okay. What's a GM type? The JH software sounds rather sophisticated--what's your opinion of it and their business operation as a whole? Any idea how they get around the interest percentage problem? Although it seems to me that Block has more of a "quality" operation, there's not much doubt that JH has "taken over" the RAL business locally (no other chains here & I started too late to generate any momentum). Neither is the HRB here offering any of the programs described above. Given the type of trade that comes with RALs, I'd think your job would be very stressful--do you feel that it is? Thanks.

dan: Since it's "not a problem" getting the offset info, would you mind posting the IRS toll-free number for the board? Thanks.

[ecb34691]

To Black Bart:
No problem, but I won't give any "trade" secrets. Yes I know you independents can't compete on the RAL world. I'm a share-holder of a JH franchise and act as the general manager/office supervisor (GM type). We have 5 EA's and about 90% of our seasonal preparers have been with us for over 5 years. Last year we had 4 storefronts and a Wal-Mart location and did over 5,000 returns. We are not a "typical" JH operation because our bank product portion is only about 30% of our business. We have an area where the median age is just over 60, so we get all kinds from a single w-2 with EIC to clients with 300 stock trades, etc. I personally do about 350 returns a year. Yes the last week of Jan and the first 2 weeks of Feb are rough with 50-60 hour weeks, but it gets better with our late seaon crowd.

I think our s/w is very powerful. I've been using it since the old DOS days and we have been a networked Windows enviroment since 2000. We have both interview and forms mode, but only let our office supervisor levels and above use forms mode. You can just get into trouble. I've tried both methods and I save about a minute in forms mode over interview mode on a typical non-Sch A return. I've used ProSeries, TurboTax and TaxCut each year in practice mode just to keep familar with whats out there. Of course we can't use them in the office, but we do use ProSeries for the 1120-S/1065/1041/990 returns we do.

I sort of "hang back" on all these boards (this one, QF, MSN, Google's moderated), but monitor them ALL daily to see what happening in the industry.

Have a great season and I enjoy you insight to our industry.

[Black Bart]

Okay, fair enough.

Thanks for the insights. The "all possible options" display software does sound impressive--I wish mine (ATX) would do the same.

Do you get the same perception that I do vis-a-vis H&R Block, that is, that JH is "doing more business" than they are nowadays (never mind if you're not supposed to discuss the competition)?

Nice chatting with you.

[Safire]

Atx

Hey Bart, this will be my first year using ATX. I hope I won't be dissapointed. I am a bit nervous about it.

[Armando Beaujolais]

As far as going to a loan company and taking out a regular consumer loan, that's usually out of the question as most of those customers' credit rating is generally shot to pieces. I assume it's okay to do it--surely JH lawyers would have already checked out the legality. But, yes, it is a loan and I don't know how they get around the usury laws that would normally restrict triple-digit interest rate percentages.

This is what doesn't make sense to me. What makes them more credit-worthy to JH than they are to any other loan company? Is there a secret forumla?

I'd bet the people who are getting those pre-tax return loans could get the same loan at a commercial lending institution. Maybe I'm wrong, but it just doesn't make sense that a person would have good enough credit for the tax preparer, but not good enough credit for the lending institution.

Unless the lending institutions don't take those customers because they're prohibited by law from charging those kinds of rates.