The I.R.S. wants to say "no" to rapid advance loans on tax refunds and Congress is considering it.
In Amarillo several tax preparation companies offer the refund expectation loan, but the government agency wants to restrict them from sending tax return information to lenders because they charge customers excessive fees in interest to repay the loan.
According to I.R.S. Spokesperson Irma Trevino, "Most of our taxpayers are earned income tax candidates are low income families. So it's very difficult for those families to pay 400 or 500 dollars for that service."
The Department of Consumer Affairs says people are paying an annual percentage rate that can range from 40 to 700 percent. The legislation is pending a decision by congress. If the I.R.S. gets their way you may not be able to get an instant refund as early as next tax season.
Another reason the tax agency wants to get rid of these loans is because it doesn't give them enough time to make sure the tax return has been prepared accurately. Also, some of the larger tax preparation firms have been abusing the policy and not explaining to people the nature of the loan.
"It's a loan that has to be paid back even if the IRS does not agree with the tax return and doesn't fund the tax return you still took out a loan." Tax Preparer Randy Rountree said.
A loan Rountree says must be repaid even if you end up owing the I.R.S. money. Here's how the loan works, once you complete your tax return, your information is sent to the bank. Once approved funds are transferred into your account within two or three days. But with that comes fees.
"Your tax preparation fee, we show people that the bank is going to charge you the $29.95, the transmitted service fee it's like nine dollars and of course the loan fee for people who want a loan." Rountree continues.