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Tax Refund Loans

Tax Refund Loans - Are the tax gods conspiring against tax refund anticipation loans? It appears so.

The partnership between the nation's largest tax preparation firm and its refund loan lender is over.

These short-term loans, often referred to as RALs, have long been popular among impatient taxpayers who don't want to wait for the Internal Revenue Service to send them their tax refund checks. Instead, they get the loan, usually offered via a tax preparer, based on the amount of money they expect they'll receive from Uncle Sam once their tax returns are processed.

Ideally, when the refund money arrives, the taxpayer would take the cash and repay the RAL, which usually has a higher than average interest rate. But too many times, that doesn't happen.

Tax Refund Loans

In recent years, the IRS has taken steps to limit advertising of such tax-related financial products. This year, the tax agency also announced it would no longer provide RAL lenders with debt indicator data.

This information lets the tax preparer and RAL issuer know whether there are other claims on a taxpayer's refund, such as unpaid government loans or court-ordered child support payments. Without the debt indicator, many lenders are hesitant to issue the short-term loans.

And now, with the 2011 tax filing season almost upon us, RALs have taken another hit.

H&R Block has lost the services of the bank through which the national tax preparation firm offered RALs.

That bank, HSBC, has terminated refund anticipation loans for Block this week after being ordered to do so by Office of the Comptroller of the Currency.

This is just the latest RAL repercussion.

Tax Refund Loans
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