All Tax Preparers' should read this article

This article was forwarded to me by a co-worker:

NEW YORK - The U.S. Internal Revenue Service said on Thursday it may restrict tax preparers such as H&R Block Inc and Jackson Hewitt Tax Service Inc from offering refund loans to customers because doing so could encourage fraud.
The agency's proposal sent shares of both companies lower. H&R Block closed down 86 cents, or 4.6 percent, at $17.75, and matched a five-year low during the trading session. Jackson Hewitt slid $7.25, or 23.1 percent, to $24.13, the lowest level in more than two years.
If adopted, the IRS proposal would limit tax preparers' ability to provide customers' tax return information to lenders that provide the tax refund loans.
Also known as refund anticipation loans, they tide over customers who expect to receive refunds but want their money immediately.
Many consumer groups complain about the loans' fees, which often equate to annualized interest rates of 40 percent to 60 percent. They also say the loans burden lower-income people, who often use them but can least afford them.
Acting IRS Commissioner Linda Stiff wrote that because the loans are often limited to the size of refunds, unscrupulous tax preparers might be tempted to inflate refunds to collect higher fees. She also said loan fees might create an incentive for preparers not to comply with due diligence requirements to ensure that claims for earned income tax credits are accurate.
"The Treasury Department and the IRS are concerned that RALs and certain other products may provide tax preparers with a financial incentive to take improper tax return positions in order to inappropriately inflate refund claims," wrote Stiff. She is also the IRS deputy commissioner for services and enforcement.
Schumer calls loans "usurious"Sen. Charles Schumer, a New York Democrat and member of the Senate Banking Committee, said in a statement "people all over the country are getting ripped off by these so-called refund loans, and it's time to stop them dead in their tracks." He called the loans "usurious."
H&R Block, based in Kansas City, Mo., said its tax preparers are not compensated for selling "ancillary" products, "so there is no incentive for them other than serving taxpayers' best interests." It said it would work with the IRS to develop best practices for refund loans.
Jackson Hewitt, based in Parsippany, N.J., said it believed adoption of the IRS proposal would not end tax refund loans. Chief Executive Michael Yerington said the company "firmly believes in the taxpayer's right to control their tax return information through a written consent process."
H&R Block offers a refund loan known as Instant Money, while Jackson Hewitt has a similar product called Money Now. Both stopped offering some refund loans in the last year.
Banks that make the loans include HSBC Holdings Plc, Santa Barbara, Calif.-based Pacific Capital Bancorp's Santa Barbara Bank & Trust unit, and Louisville, Ky.-based Republic Bancorp Inc., according to the companies' and tax preparers' Web sites.



P. Harker Tax Adivsor 4/Tax Preparation

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