Re: H&R Block: How Does It Get Around Pub 1345, Page 44 Rules?

I think it boils down to, you can call a refund a refund, you can call a loan a loan, but you can't call a loan a refund and say it's a "faster" refund.

-Mark Bole

Mark Bole wrote in news:rrKKj.580$%41.139 @nlpi064.nbdc.sbc.com:

That's the essence of it. Calling a loan a refund should (is?) against the law, at least in NY. So HRB calls it a RAL. But it is still a loan, at excessive interest rates, and with the refund as collateral. What does SOOL mean again?

"Han" wrote

Refund Anticipation Loan.

I always try to see who will make me a CBAL: Christmas Bonus Anticipation Loan, or a BPAL: Birthday Present Anticipation Loan, or the ever so popular LWAL: Lottery Winnings Anticipation Loan. For some strange reason, there's not anyone willing to fund those.

If the robo-moderator (or the live guy) doesn't bleep this: S*it Out Of Luck.

"Paul Thomas, CPA" wrote in news:sCNKj.33404$ snipped-for-privacy@bignews2.bellsouth.net:

That is mean for the poor guy who needs money and steps up to the plate GO METS!) to get a quick "refund".

But the poor saps who fall for this don't really care what it's called, it's just money, and they're getting it a few weeks earlier than they would otherwise.

So it seems like this IRS rule doesn't really protect anyone. Most people who understand the difference between a loan and a refund would proably notice the fine print about the interest rate even if HRB used the wrong term.

"Barry Margolin" wrote

In hindsight, I think what may have happened with the woman I know who used H&R Block is that it was January 11 and she needed her roughly $3000 refund (largely EITC money) a.s.a.p. She would have had to wait until at least February

As probably nearly every regular who posts here knows, folks like this are typically scared of the complexity of taxes. At best, they may know something about audits: Those who take the EITC are more likely than those who do not (all other things equal) to be audited. I would think these folks feel using a professional tax preparer gives them some protection.

The occasional fraudulent taxpayer aside, I think these people are not "saps." They are in a desperate situation without the education to cope. I think the IRS does "get it," hence all the discussion at the IRS site and others about RALs. Those more in-the-know should get it, too, because H&R Block et al. are pocketing a sizable chunk of EITC money (= public welfare money) every year that is supposed to be going to the more immediate needs of the families receiving it.

I found it interesting that Block presents the interest rate and other fees very clearly. They are in large type, put on a page with just these items, and followed by a signature page. I think this method of presentation is likely a result of the IRS and various state attorneys coming down on Block.

Blah blah I know: Life is lousy for lots of folks.

Elle wrote: [..] Plus she technically should not

Does VITA *anywhere* routinely do Schedule C, which would apply to a small business even without depreciation? A person who taught me much about taxes once opined that if you claim EIC based primarily or solely on self-employment income, you are almost guaranteed to be audited.

Don't forget bartering (non-cash) income as a basis for claiming EIC, folks in Humboldt County used to be fond of that... ;-)

-Mark Bole

I'm not disputing this, but could someone please enlighten me. What's the logic in this?

P.S. - I don't know much about the EIC other than the very basics, so please "talk slowly".

TIA

I wonder if this has anythinig to do with the statistic I heard that the IRS is more likely to audit the poor than the rich. After all, the rich would never cheat on their taxes, right?

Stu

Probably the history of EITC fraud schemes.

Stuart Bronstein wrote: ...

That there are far more poor than rich have anything to do with that?

Or maybe because the rich have considerable more resources to fight an audit. Or maybe because they don't want to piss off the people that provide most of their revenue AND have the means to lobby for tax law changes???

Just possibilities.

Statistics like the following might be said to be behind the higher rate of audit for those claiming the EITC: "The IRS estimates that somewhere between 27 and 31 percent of earned income tax credits were issued erroneously in 1999, either because of taxpayer confusion or fraud."

See for example:

But certainly nor do I mean to accuse the poor of (intentional implied) fraud. The first web site citation above indicates there is a lot of confusion about simply taking dependents (never mind the EITC). Messing up dependents can mess up the EITC calculation, among others. Poor families sort of trade off (legitimately) family members so as, ya know, to keep them off the streets and fed. Tests like a person living six months in one's home try to make it clear who gets to claim whom as a dependent. Throw in that some parts of the country have a high fraction of low income folks who do not have Social Security Cards but instead have ITIN cards, and exactly how these people are counted for various purposes on the tax return is further confusing to the unversed.

Wikipedia has a decent history of the Earned Income Tax Credit.

Either way, didn't mean to start a (very!) big discussion of poor folks and taxes. My eyebrows did go up when I read a recent H&R Block contract, so I read more on Refund Anticipation Loans (RALs) etc., and I queried here to make sure I had a better grip on what Block et al. get to do.

Thanks for the info. I learned something new today!

No, it's just basic statistics. If you randomly audit returns, and 80% of the returns are from "poor" (in this context, equals "not rich") people, then 80% of the audits will be of same poor people.

-Mark Bole

With most tax tussles, it is your own money that is potentially being refunded to you... you can't get back more than you put in (once your tax is down to zero, additional deductions will gain you nothing).

With credits such as EIC, we're talking welfare -- it is someone else's tax money that you are going to get back. The incentive to game the system is much higher.

-Mark Bole

But audits aren't done at random, they supposedly look for triggers.

Poor people may be more inclined to cheat on their taxes simply because they NEED whatever they can save more than rich people. Rich people don't need to cheat as much, they have lots of legitimate tax loopholes available to them.

On the other hand, when rich people DO cheat, they get much more out of it.

As I learned once in this group, a certain number of audits must always be conducted at random, else how to establish a baseline?

The funny thing is, ordinary deductions are limited or disappear altogether for so-called "rich people".

(I'm using the term "rich" to describe people under $1.5M AGI and over $150K -- your definition may vary depending on local conditions).

Making up deductions really doesn't help the rich that much. Limitations and phase-outs and progressive brackets eliminate many tax benefits. My experience is that our current federal income tax system is progressive by design (and not flat), within this income range.

-Mark Bole

You've piqued my interest here. Could you perhaps elaborate on these legitimate tax loopholes for us?

I'm probably not the only one who would like to know .

ChEAR$$$, Harlan Lunsford, EA n LA