TAP 04-007

Free File Eliminate RALs

Statement of Issue:

For over a decade, Refund Anticipation Loans (RALs) have been marketed by preparers to taxpayers who want their cash quickly; with the advance offset by the “anticipated” tax refund. This method allows taxpayers to have their refund in hand within a day or two of having their taxes completed.

Because of the complexity involved in the transaction and the inability for full disclosure of the terms on-line, FreeFile Alliance members’ services should not include RALs.

Because of the complexity involved in the transaction and the inability for full disclosure of the terms on-line, Free File Alliance members’ services should not include RALs.

Proposal:

FreeFile Alliance members should follow the lead of Intuit and eliminate the marketing of RALs to on-line consumers. The IRS needs to set the standard to limit this service, as the intricacies of the on-line “loan” are confusing to taxpayers. Clients in this transaction are unable to ask questions, gain clarification or other meaningful feedback from the preparer at the time they sign up for the on-line loan.

Because of the complexity involved in the transaction and the inability for full disclosure of the terms on-line, FreeFile Alliance members’ services should not include RALs.

Response Notes:

The IRS does not endorse RALs and informs taxpayers they are under no obligation to purchase RALs or any product or service from software companies. The IRS cannot prohibit their existence in ancillary products/services being offered by the Alliance members. While IRS cannot legally require the companies not to sell RALs, many have decided on their own accord not to include them in their 2004 Free File offering.