- quote -

That's what I thought. ACtually I wasn't even thinking
about RAL's and associated "fees", just a fee for
electronic filing.

ChEAr$,
Harlan

<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

- quote -

That would not surprise me. In my previous work for a big
(cubist) tax preparation firm, we had a number of clients
who would come in and complain that we did not file their
return electronically, they had specifically come to us and
paid our fees for the return to be filed electronically. My
reply was that we only charged for filing the return by the
appropriate method for their particular return - there was
no difference in cost between paper or electronic.

However, as a private tax preparer, I am seriously thinking
about charging an additional $15 for the PAPER returns as
they require me to print and deliver in a short timeframe.
The electronic returns allow for a scheduled back-end work.
(In fact, I am still working through the back-end work on my
returns even though it has been 6-7 months.

<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

- quote -

This is from Pub 1345: If you charge for RAL you charge
everyone the same RAL fee. No contingent RAL fees.

Fee Restrictions

Authorized IRS e-file Providers may not base their fees on a
percentage of the refund amount or compute their fees using
any figure from tax returns.

When assisting a taxpayer in applying for a RAL or other
financial product, the Provider may charge a flat fee for
that assistance. The fee must be identical for all customers
and must not be related to the amount of the refund or the
financial product. The Provider must not accept a fee that
is contingent upon the amount of the refund or a RAL or
other financial product from a financial institution for any
service connected with a financial product.

The IRS has no responsibility for the payment of any fees
associated with the preparation of a return, the
transmission of the electronic portion of a return, or a RAL
or other financial product.

--
ArtKamlet at a o l dot c o m Columbus OH K2PZH

<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

- quote -

Admittedly I haven't checked lately, but I used to charge
extra 15$ for electronically filing in the early years, but
gradually reduced that to zero, since 99.9% of my returns
are now efiled.

But I do think I could still do it, even though I have no
extra cost these days. In earlier years each efiling cost
me an extra 5$ as I recall.

ChEAr$,
Harlan Lunsford, EA n LA

<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

- quote -

Good point. There are actually two types of fees involved
in most tax return bank products. One is definitely akin to
a loan origination fee. It is fixed in amount and paid both
for actual loans (RALs) and also for the other non-loan
products that allow the tax preparation fees to be deducted
from the refund. The other fee, which is charged only for
RALs, is more akin to interest. It is a function of the
amount of the refund, but not of the length of the loan.
The truth-in-lending disclosure will state an effective rate
of interest based on both of these fees and the typical
length of the loan.

For the fees charged by a major player, see
http://www.taxadviceline.com/refunds.shtm

--
Don EA in Upstate NY

<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

- quote -

IRS Pub 1345 also prohibits EROs from charging taxpayers
a fee for most electronic services including RALs.

The bank can charge a fee for banking services.

- quote -

Not that most RAL clients would use this, but mortgage loan
origination fees are deductible as interest/points.

--
ArtKamlet at a o l dot c o m Columbus OH K2PZH

<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

- quote -

When I started working for H&R Block in the '90s there was
an extra fee of $20 added to bank products. The tax
preparer received a commission from this fee. Several years
ago it was decided that this extra fee was actually
interest, and because H&R Block isn't a bank it is not
proper to charge interest, so the fee was dropped. That is
how I remember it anyway. Preparers now get nothing extra
for doing the paperwork for a RAL. The taxpayer is still
paying interest on the loan.

Moderator:
While RAL's are, in my rarely humble opinion, an ethical
abomination, the fees are not interest. They are akin to
loan origination fees.

<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

- quote -

Is there a law to that effect? People who arrange loans
often get commissions from the lender. I'm sure you don't
mean to say that these loans are made without interest.

That said, if the preparer is the one making the loan, it
does earn income on the interest it earns.

Stu

<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

- quote -

The extra fee for the RAL went away several years ago.

<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

- quote -

Maybe it was true years ago, but I have been working for H&R
for 4 years, and I can assure you that tax preparers are not
paid anything more if a client wants a RAL. Compensation is
based on complexity of the tax return, with a small
incentive if the taxpayer opens a savings account or
purchases the "Peace of Mind" extended service plan.

<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

I wish to thank everyone for their thoughtful comments on
what can be a difficult, awkward topic.

-Doug

<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

- quote -

Is this accurate? H&R and another store-front office that I
used to work for both paid the preparer a small additional
commission for selling a RAL.

--
Don EA in Upstate NY

<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

Doug <PurplePenguin44[at]yahoo.com> wrote:

- quote -

About 25 years ago the authors of Unix patented a bit.

One bit in the unix kernel, the suid (Set User ID) bit. It
has a patent and served as a very useful unix feature.

The patent is mentioned briefly in Kernighhan & Pike's Unix
book.

The IRS agreed to supply all EROs (Electronic File
Originators) with a much more valuable single bit, though I
suspect the IRS did not patent it: The Debt Offset
Indicator.

When a state child support agency or student loan originator
etc notifies the Department of the Treasury's Financial
Management Service (A parallel government agency to the IRS)
to offset a taxpayer's refund to pay back taxes, child
support or student loans, FMS notifies IRS to offset the
refund and the IRS sets that bit when acknowledging the
EFiled tax return, and sends that bit back to the ERO.

So the folks working the RAL and any other return knows if
the refund will be heldr, at the instant they receive the
E-Postmarked Acknowledgement.

The Lender's risk is thereby minimized, and the RAL industry
lives another day.

Last year Nina Olsen, the Taxpayer Advocate, who reports
directly to the IRS commissioner but by statute is required
to send two annual reports to Congress without going through
the commissioner, meaning she has a dotted line relationship
directly to Congress, recommended dropping this bit from the
acknowldgement.

Since this one single bit plays such a critical role in the
RAL industry, lots-a-luk.

--
ArtKamlet at a o l dot c o m Columbus OH K2PZH

<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

Harlan Lunsford <fg5cfm$do2$1[at]panix1.panix.com> wrote:

- quote -

One reason might be cheap check cashing offerred by the
RAL's banking partner.. From what I read, most RAL clients
are what the industry calls the "unbanked."

Those with no bank accounts and who pay an unreasonable
amount to get te checks cashed.

--
ArtKamlet at a o l dot c o m Columbus OH K2PZH

<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

Doug wrote:

- quote -

One ray of hope on the horizon is CADES system being
implemented (piecemeal) by IRS. The system started a year
or so ago processing just 1040ez forms, then being expanded
yearly to include the more complicated returns, until
finally one day all efiled returns will be processed under
it.

Last year 5 millions returns were so processed and direct
deposits were made 24-48 hours after ACKNOWLEDGEMENTS were
sent to ERO's. Imagine that, efiling a return one day and
having money in your account within two days!

Now why would/will anyone use an RAL in the future when they
can have their refunds so much quicker?

Another more biting question: Did HRB and JH, et al
indicate to clients that their refunds could/would have been
processed under CADES and thereby be more able to be
refunded quicker without having to resort to an RAL?

IMWTK!

ChEAr$,
Harlan Lunsford, EA n LA

<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

Reading some of the sad stories at the link has prompted me
to respond, in hopes of providing some clarification,
although I doubt that the readers of this newsgroup or the
ones who need the information. I am not a spokesman for H&R
Block, nor am I in favor of refund loans or any other type
of high-interest advances. If the IRS can shorten the span
between receiving a return and releasing the refund, these
loans will be rendered obsolete. I look forward to that
day.

At H&R Block, the word LOAN is in about three inch high
letters on the application. Do all preparers adequately
explain everything involved? Probably not, and it is a long
document (which includes the proviso about offsets).

With the exception of the IRAL (instant loan), the preparer
has no idea if the loan will be approved or not or when HSBC
will release the money. Yes, it's a problem if a preparer
tells the client that they'll get their money on a specific
day. However, some clients hear what they want to
hear--tell them "if the loan is approved, the money is
usually released within 1-2 days," and they hear "you'll
have the rent money on Tuesday."

Apparently quite a few people do not realize that there are
charges in three areas: tax preparation, a bank fee, and the
actual interest on the loan. No interest is charged at H&R
Block if a loan is denied, so they actually receive more
money than was originally indicated. Sometimes they are
surprised because they owed Jackson Hewitt money and
switched to H&R Block, not knowing that the companies use
the same bank. H&R Block cannot help them with offsets, it
is in the hands of the IRS or HSBC (it is illegal for a tax
preparer to directly receive a client's refund).

There is no additional compensation for preparers when a
client takes out a loan, so there is no incentive for
preparers to push these products on their clients--it
basically exists as a convenience for clients who want it.
H&R Block would get their clocks cleaned by their
competitors in January and February if they didn't offer
these products, but they seem to end up as the whipping boy
for all of the national tax preparation firms.

If states hadn't repealed their usury laws, we wouldn't be
having this discussion; btw, a new federal law is now in
effect that prohibits these loans to military
personnel--maybe that protection could be expanded to the
general population?

<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

RAL means "Refund Anticipation Loan." And it has been the
engine which has driven much of the storefront tax
preparation industry. And it can get you your refund about
two weeks earlier, but it does have some negatives.

There are considerable interest and fees. It's not as easy
to get as the advertisements sometimes imply, and sometimes
clients don't even know that they're getting a bank loan (Do
the words "Instant Refund" have loan anywhere in them?). If
a customer isn't approved, he or she is stuck with account
fees and still has to wait two weeks. Here's one pretty
good website, where people are basically complaining that
they weren't approved for the loan when they had a perfectly
good tax refund and that they weren't told in advance. This
is specifically talking about H&R Block. I imagine it's
largely the same for Jackson Hewitt and Liberty Tax, and
perhaps for independent practitioners as well.
http://consumeraffairs.com/finance/hr_block_ral.html

The other issue is "debt offset," also called
"cross-collection." This is similar to the IRS taking part
or all of a tax refund for child support or student loans,
except it's the bank doing it for a much broader category of
consumer debt. And, no, the client is not adequately
informed of this.

Please tell me if I'm successfully hitting the high points.
And can you recommend additional consumer websites? Thanks.

-Doug

Moderator:
You are successfully hitting what I consider to be the
ethical low points which I consider to be the direct
effect of the AICPA deciding not to fight the FTC in the
80's. It was caused by governmental passion for
deregulation and a professional organization not willing
to stand their ground and fight over ethics.

<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >