Irs May Stop Ral's By Tax Preparers

[JSLATER]

From Bloomberg News, but not on IRS site. "Jan. 3 (Bloomberg) -- The Internal Revenue Service said it may try to prevent tax preparers such as Jackson Hewitt Tax Service Inc. and H&R Block Inc. from offering customers refund loans and audit insurance because they can encourage fraud.

The plan, if adopted by the IRS, would restrict tax preparers from passing along tax return information to lenders who provide instant refunds and then charge customers predatory interest to repay the loans. Consumer groups and taxpayer advocates have urged the government to crack down on such practices. "

[taxmandan]

Many in IRS management have opposed RALs

for many years. Not likely to happen, too much money in campaign coffers of Congress from financial institutions to expect such a ban on loans. And, it is an incentive for many low income people to actually file a return, which they would avoid if they weren't getting a bunch of money back in time to pay Feb. rent.

[dtlee]

Agree with TaxManDan

Even if this were to happen, it won't be soon. They are still soliciting comments on this and I would guess they would be more than a year away from implementing something even if they did decide to change things.

[ChEAr$]

HRB response

"H&R Block Comment On Proposed RAL Restrictions
Thursday January 3, 4:33 pm ET

KANSAS CITY, Mo.--(BUSINESS WIRE)--We look forward to working with the IRS on continuing to develop best practices for refund anticipation loans, just as we did over the past two years on the privacy rules announced today, which reflect many of H&R Block’s existing guidelines. H&R Block’s tax professionals are not compensated on the sale of ancillary products, so there is no incentive for them other than serving taxpayers’ best interests. In addition, RALs are currently regulated by 10 federal laws and IRS rules. The typical RAL at H&R Block costs about 2 percent of the principal, or less than the cost of a credit card advance, bank overdraft, or in many cases, using an ATM."

[veritas]

All the IRS

needs to do is speed up the drain process and send out the money more than once a week.

[ChEAr$]

speed

needs to do is speed up the drain process and send out the money more than once a week.

And you know what? they did that last year using the CADES system for 5 million returns.
More should be in the offing this year.

[taxmandan]

And you know what? they did that last year using the CADES system for 5 million returns.
More should be in the offing this year.

At an e-file seminar several years ago they discussed the upgrades in computer systems at theIRS. In 2009 they plan to switch to a XML format language for the 1040 series of returns and at that time they said refunds will be deposited into the TP bank account within 48 hours of acknowledgement. I think that the CADES system is part of that planned upgrade. It will be great if that happens.

[solomon]

"H&R Block Comment On Proposed RAL Restrictions
Thursday January 3, 4:33 pm ET

KANSAS CITY, Mo.--(BUSINESS WIRE)-- H&R Block’s tax professionals are not compensated on the sale of ancillary products, so there is no incentive for them other than serving taxpayers’ best interests.

What about H&R corporate compensation from the banks?

[JohnH]

I'm sure

HRB will be able to tell you how their corporate compensation from the banks actually "serves the taxpayer's best interests". I can't, but I'm sure they can - just ask them.

[taxxcpa]

HRB serves the taxpayer's interests, not their own.

HRB will be able to tell you how their corporate compensation from the banks actually "serves the taxpayer's best interests". I can't, but I'm sure they can - just ask them.

I noticed that HRB said its "preparers" did not receive extra compensation. They didn't mention that the HRB corporation got a ton of money from the RALs.

[JoshinNC]

Both HRB and JH

stock dropped more than 25% on 1/3/08 on this news. It seems that just a hint that the RAL's will go away leads "the experts" on Wall Street to believe that these "tax preparers" would be driven out of business.

[taxxcpa]

Wall street

stock dropped more than 25% on 1/3/08 on this news. It seems that just a hint that the RAL's will go away leads "the experts" on Wall Street to believe that these "tax preparers" would be driven out of business.

I don't think it is expected to put them out of business, just make their business a lot less profitable. I believe HRB was trying to corner the market: banking, credit cards, sub-prime mortgages, and they would even still prepare taxes.

[JoshinNC]

Actually they are trying to divulge themselves

I don't think it is expected to put them out of business, just make their business a lot less profitable. I believe HRB was trying to corner the market: banking, credit cards, sub-prime mortgages, and they would even still prepare taxes.

of all businesses except their core tax business. They fired thier CEO who led them into these other markets and now have an acting CEO who has been shopping buyers for all their ancillary products. Cerberus Capital (those guys who bought Chrysler) just backed out of buying Option One, HRB's mortgage arm. That put them in a cramp and then the IRS is talking about stopping RAL's. I think their days are numbered, which would only be good for "real tax professionals".

Let the griping begin with that last comment!

[gkaiseril]

Sub-prime mortgages

stock dropped more than 25% on 1/3/08 on this news. It seems that just a hint that the RAL's will go away leads "the experts" on Wall Street to believe that these "tax preparers" would be driven out of business.

H&R Block also has a sub-prime mortgage business called Option One, as well as other businesses in the financial services sector.

For recognizing the revenue from Option One, they accelerated the earnings by bundling the mortgages and selling them to a trust, disclosed in their financial statements. My guess is they have had to either put up some reserves or buy back some of the losses.