The Internal Revenue Service announced on Thursday that it is examining whether to restrict tax preparers from offering refund anticipation loans. No decision has been made, but already investors are selling off stocks of H&R Block Inc. and Jackson Hewitt Tax Service Inc.
According to the IRS, these loans harm low income families that can least afford the usurious fees charged on refund anticipation loans (RALs). Indeed, such fees are regularly far above the usury limits for most states. Most consumer advocates agree.
The IRS has another reason for proposing the action that has more to do with ensuring that the proper taxes are collected. They want to take away incentives for tax preparers to cheat.
These RALs are based in part on the actual refund amount expected by consumers. As such, these tax preparers stand to increase their earnings if they can inflate the refunds of their tax clients.
In 2007 several Jackson Hewitt offices were shut down briefly in North Carolina due to perceived abuses by tax preparers there. In all, 37 tax outlets were closed due to numerous illegal acts to inflate the value of refunds.
In a bold move by the IRS, a separate announcement was made last year on shutting down 125 Jackson Hewitt locations in four states. In all, $70 million may have been bilked from the US Government through “tax-fraud schemes.”
Note: Comments concerning REG-136596-07 are due by April 7, 2008.
ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-136596-07), Room
5203, Internal Revenue Service, PO Box 7604, Ben Franklin Station,
Washington, DC 20044. Submissions may be hand-delivered Monday through
Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-
136596-07), Courier’s Desk, Internal Revenue Service, 1111 Constitution
Avenue, NW., Washington, DC, or sent electronically via the Federal
eRulemaking Portal at http://www.regulations.gov (IRS REG-136596-07).
FOR FURTHER INFORMATION CONTACT: Concerning submissions of comments,
Kelly Banks at (202) 622-7180; concerning the proposals, Lawrence Mack
at (202) 622-4940 (not toll-free numbers).