RALs Yes or No?

[erchess]

I wondered what people here think about these loans. I do not offer them for several reasons.

RAL clients start breathing down your neck wanting their checks within half an hour of leaving your office. They expect you to put as your very top priority cutting their check the instant it is available and calling them to come get it.

RAL clients blame the preparer if they have to pay off the loan from monies other than their refund. I am convinced that many do not understand that they are taking out loans despite my best efforts to explain the situation.

High Wealth Clients will not come to a preparer who does these Loans. In today's market people with incomes under 45K will not come to a preparer who does not offer them. So my clients range from $45-105K in total income because those with incomes above that level have Tax Attorneys who shelter their income with trusts and etc that I cannot create.

[Bees Knees]

I do not offer RALs, but I’m not going to judge those who do as evil. I think there are legitimate purposes for offering RALs.

I think this year, however, RALs are going to be a risky product to offer. IRS has already threatened to delay processing some 50 million tax returns this year due to AMT. If you hand out money now, does the taxpayer understand the refund could be delayed? Who is going to pay the interest on the loan? How do you know whether the final AMT bill will include or exclude your client?

I’m seriously considering putting all my clients on hold until I know for sure, or else spell out exactly all the extra fees I will have to charge to amend or re-do their tax return for whatever happens.

[DaveO]

No Ral's here

Although it would be nice to be able to get our fees from the refund. I agree with your take on it however I do have quite a few clients in the sub $40K range. I take care to expalin to them the benefits of not taking a RAL.

[erchess]

TY to you both

I don't mean to judge people that offer RALs. I simply find that this sort of client is not pleasurable to deal with nor good for the kind of business I want to run. It also happens to be my opinion that consumer protection laws should substantially lower RAL fees and specify that the lender has to accept as payment in full and on time whatever the IRS gives whenever the IRS gives it, if ever. Until those laws are passed I do not question the ethics of charging for these products whatever the market will bear.

I agree with Bees that RALs and other early returns are likely to be unusually problematic this year. I will follow Bees' lead in handling people who want returns done in January.

Now Dave I have never sold one but I do offer what several banks call a PERC. Basically for a small fee a checking account is created for the taxpayer at in my case Santa Barbara Bank and Trust. The refund is direct deposited into this account. The bank then deposits my fee into my account and releases the balance to the client. Most preparers will print a check for the client but I won't. Depending on their preference the money can be direct deposited into another account owned by the client or the money can be put on a debit card which I can give at the time of preparation. The card has an 800 number they can call for any questions about the whole process so they have no motive to bother me. As I say I have yet to have a client wish he could avoid paying me up front but hey I want to be prepared.

[Donald Rihn, EA]

RAL's, no!

I do not offer RAL's.

Probably good money in it, but in my area, I would have to be bilingual.

I have no problem with those that do offer the service.

[dkss]

I do 'em, but I don't like 'em

I do NOT push clients to get a RAL. In fact, I really encourage E-file with DD. For those who "can't pay my fees", I suggest payment plans, suggest they borrow from a relative, or I suggest the lesser of two evils - the ERC (bank sets up account which IRS deposits into, withholds my fees, and issues check to taxpayer). But, unfortunately, too many EIC people do not have a problem spending money that was never theirs to begin with and insist on the RAL.

I think that if the filing season is delayed, I will end up with more people wanting RAL's. That would be a huge headache on top of everything else!

BTW, I never offered the "don't need a w-2, bring us your last paystub" loan program that HRB and JH offered last year.

[ecb34691]

No bank that I'm aware of are offering the early paycheck stub advances against their estimated refund this year. (They evidently took a real "hit" last year). Also a RAL can't be issued until the return has been accepted by the IRS, doesn't have a debt indicator and is approved by the issusing bank. With the AMT patch problem, nobody knows when e-file will start. There will fewer RAL's this year because nobody in the military, their spouses or dependents will be able to apply for loans over 36%. This is new under the Warner Bill. I'm a part owner of a JH location and I don't like RAL's but if the customer wants them, they can have them. We are not the typical JH location in that our RAL % is much lower that the normal JH. We are a heavy ETR/DD operation with 4 EA's in 3 offices. The banks make all the money and we have to store their documents for 60 months as opposed to 3 years for tax returns and can't add a charge to the return for our services.

[JohnH]

I don't do them

I tended to hold a negative view of RAL providers until I began to read & consider discussions on this and other forums over the past couple of years. I've changed my mind and acknowledge that some preparers must either offer RAL's or close their doors because of their competitive situation.

I still don't like RAL's and can't envision myself ever offering them (especially since I still paper file), but it's a free country and if people want to pay the price to get their refund a few days or weeks early, it's their choice. After all, I've ordered products on the internet and paid an effective 300% premium or more on the freight charge just so I could have the item in time for someone's birthday or to meet some other deadline.

[Black Bart]

Any idea why?

No bank that I'm aware of are offering the early paycheck stub advances against their estimated refund this year.

Our local JH franchisee did a tremendous business in "paystub loans" the last couple of years. I assume they're lots of trouble, but I'd think corporate JH wouldn't let that stand in the way.

[Larmil]

No!

I wondered what people here think about these loans. I do not offer them for several reasons.

RAL clients start breathing down your neck wanting their checks within half an hour of leaving your office. They expect you to put as your very top priority cutting their check the instant it is available and calling them to come get it.

RAL clients blame the preparer if they have to pay off the loan from monies other than their refund. I am convinced that many do not understand that they are taking out loans despite my best efforts to explain the situation.

High Wealth Clients will not come to a preparer who does these Loans. In today's market people with incomes under 45K will not come to a preparer who does not offer them. So my clients range from $45-105K in total income because those with incomes above that level have Tax Attorneys who shelter their income with trusts and etc that I cannot create.

My business is tax preparation - not loaning money..

[JoshinNC]

I've noticed that too

Our local JH franchisee did a tremendous business in "paystub loans" the last couple of years. I assume they're lots of trouble, but I'd think corporate JH wouldn't let that stand in the way.

I rode by the local HRB office today and the lights were out and no one was home. They did have a sign on the door about a $500 advance, but didn't get the specifics.

As for RAL's, we offer them out of neccessity, but I try to talk my clients out of them. A good option for those who can't/won't pay the fee out of pocket is the ERC with DD. No matter the refund size they are charged a flat fee ($28) and my fee is deducted when the account is funded. We might do 20-30 RAL's a year, but I anticipate that number being higher this year. If the AMT fiasco delays filing for 6 -10 weeks my normal January and February filers are going to be strapped for cash (since they've already spent that money for Christmas gifts) and need it quick.

[newbie]

Interesting......

No bank that I'm aware of are offering the early paycheck stub advances against their estimated refund this year. (They evidently took a real "hit" last year). Also a RAL can't be issued until the return has been accepted by the IRS, doesn't have a debt indicator and is approved by the issusing bank. With the AMT patch problem, nobody knows when e-file will start. There will fewer RAL's this year because nobody in the military, their spouses or dependents will be able to apply for loans over 36%. This is new under the Warner Bill. I'm a part owner of a JH location and I don't like RAL's but if the customer wants them, they can have them. We are not the typical JH location in that our RAL % is much lower that the normal JH. We are a heavy ETR/DD operation with 4 EA's in 3 offices. The banks make all the money and we have to store their documents for 60 months as opposed to 3 years for tax returns and can't add a charge to the return for our services.

I was just thinking that I haven't heard the hard hitting ads for RAL's or bring in your last paystub and we'll give you an advance type refund. Also drove by HRB yesterday about 4:00 and they were not open - rather surprised me. I was guessing it was because of the AMT patch issue.