Archive for RAL
IRS Nationwide Tax Forums Report
Posted by: | CommentsI just returned from the last of the six IRS Nationwide Tax Forums in San Diego, which had about 2,000 attendees. The previous Forum in Las Vegas had over 6,000 attendees. The first two Forums in Atlanta and Chicago in late June and early July were uneventful. Then the flood gates opened in Orlando and New York City with 3,000 attendees each. Beginning with Orlando, our booth has been swamped with tax professionals and tax business owners seeking solutions to their needs for tax education. A growing number of tax professionals are concerned about complying with the new tax preparer regulations (link to videos).
At the NY Forum I met privately for 90 minutes with the IRS Return Preparer Implementation Project Lead for Testing and Continuing Education to provide input on curriculum standards. He indicated that IRS plans to review the content of each Continuing Education (CE) program of every approved provider. This process will be a major project and will most likely result in the Continuing Education requirement being delayed until 2012 instead of 2011. CE Providers will be assessed program review fees, which will result in higher prices for CE. At the Orlando Forum I talked with the director of the IRS Office of Professional Responsibility who is leading the IRS Tax Preparer Regulation program. She is committed to eliminating unqualified tax preparers including, ultimately, CPAs and attorneys who prepare tax returns without adequate education in the tax laws. I also had discussions with the director of the IRS National Public Liaison office who is a member of the IRS team for Preparer Regulation.
The tax industry vendors in the Expo Hall included the usual tax software companies, service bureaus, franchisors, financial services firms and providers of various resources for tax professionals, including bank products. Notably, several new vendors surfaced that provide stored value credit cards as an alternative to traditional RALs and RACs. In San Diego we were next to one and directly across from another. I recommend looking into the Get It Prepaid MasterCard from ADVENTafs info@adventafs.com. This RAL/RAC alternative will enable you to collect your fees and your clients to get their refunds quickly at a very low cost. With the elimination of the Direct Deposit Indicator, the price of RALs will increase and fewer taxpayers will be approved. However, RALs will not go away. Who will provide RALs and what they will cost is still not determined. We may not have details on all the available options until November.
IRS should be announcing preparer registration procedures soon after Labor Day. We can also expect an announcement about Continuing Education during September. As far as we know, the IRS Exams are still scheduled to be available by July 2011 and preparers will have until 12/31/2013 to pass the test. Anyone who is not registered as a tax preparer by this December 31st will not be able to prepare tax returns during the 2011 tax season. Therefore is you will need to hire tax preparers, you should recruit them and get them trained and registered before the end of this year.
RALs Not Going Away
Posted by: | CommentsI am at the NYC IRS Tax Forum and have talked with my contacts at several RAL banks. The SBBT successor has funding and a bank partner and will be providing RALs, as will a few other RAL banks. The same thing has happened in the past when the DDI was pulled in late December 1994 for the 1995 tax season by then Treasury Secretary, Lloyd Benson. The result was higher RAL fees and fewer RAL approvals. The same will happen for the 2011 tax season. We will encourage our RAL clients to switch to a lower cost stored value credit card, also called a prepaid credit card, which is the equivalent of a RAC. This option will be offered by the RAL banks as well as by several credit card providers. Many prior RAL customers should still be able to get RALs in 2011, but they will pay a higher fee.
IRS Removes Debt Indicator for 2011 Tax Filing Season
Posted by: | CommentsIR-2010-89, Aug. 5, 2010
WASHINGTON — The Internal Revenue Service today announced that starting with next year’s tax filing season it will no longer provide tax preparers and associated financial institutions with the “debt indicator,” which is used to facilitate refund anticipation loans (RALs).
“As we prepare for tax season every year, we look at past practices and consider whether they still make sense. We no longer see a need for the debt indicator in a world where we can process a tax return and deliver a refund in 10 days,” IRS Commissioner Doug Shulman said. “We encourage taxpayers to use e-file with direct deposit so they can get their refunds in just a few days.”
So far this year, more than 95 million tax returns have been e-filed, representing more than 70 percent of tax returns.
“Refund Anticipation Loans are often targeted at lower-income taxpayers,” Shulman said. “With e-file and direct deposit, these taxpayers now have other ways to quickly access their cash.”
The IRS has been reviewing refund settlement products, such as RALs and Refund Anticipation Checks (RACs), as part of the Return Preparer Review released in January. Specifically, the IRS announced that it would study refund settlement products.
RALs are loans secured by a taxpayer’s anticipated tax refund. Currently, tax preparers who electronically submit a client’s tax return receive in the acknowledgment file an indication of whether an individual taxpayer will have any portion of the refund offset for delinquent tax or other debts, such as unpaid child support or delinquent federally funded student loans. This acknowledgment is known as the debt indicator, and is used as an underwriting tool for RALs.
The IRS announcement would remove the debt indicator starting with the upcoming 2011 tax filing season. The IRS noted that taxpayers will continue to have access to information about their tax refunds and any offsets through the “Where’s My Refund?” service on IRS.gov.
RACs are temporary bank accounts established on behalf of a taxpayer into which a direct deposit refund can be received and out of which a bank typically issues a payment to the taxpayer.
With both RALs and RACs, tax preparation and product fees are subtracted directly from the refund, and the taxpayer does not make any “out-of-pocket” payments. They are frequently marketed to taxpayers who do not have cash to pay for professional tax preparation services.
In a related effort, the IRS plans to explore the possibility of providing a new tool for the 2012 tax filing season to give taxpayers a mechanism to use an appropriate portion of their tax refund to pay for the services of a professional tax return preparer. The IRS plans to engage with taxpayers, consumer advocates and the tax return preparer community to consider whether providing this option would be a cost-effective way for consumers to pay for tax return preparation services.
