Refund Anticipation Loans Changing

SIOUX FALLS, SD - If you count on getting a quick loan on your tax refund, you may be out of luck this year; or the amount you get may be smaller.

The IRS has made a change that's affecting the banks ability to offer the loans. And in the case of one major tax preparer, it won't be able to offer refund anticipation loans at all.

This time of year, many taxpayers are looking for some quick cash.

"These rapid refund loans tend to be very popular early in the season because a lot of taxpayers have over-extended for one reason or another; maybe because of Christmas," Tim Ness of Ness Tax & Bookkeeping Services said.

But this year, those who qualify will get a $1,500 installment and about two weeks later get the remaining amount. That's the case for a small independent preparer like Tim Ness, or giants like Jackson Hewitt Tax Service Inc. and Liberty Tax Service.

It's all because of a change made by the IRS.

"The IRA used to share a debt indicator with these banks so if an individual had back taxes or back child support or back student loans, things of that nature. They basically flag the account to let the bank know, 'Hey don't give these folks a refund loan;' and a bank could count on that," Ness said.

But now the IRS will no longer share that debt indicator with preparers and banks.

"The banks are either now not going to provide rapid refund loans or put certain restrictions on loans they do provide," Ness said.

Major tax preparer H & R Block won't be able to provide the loans at all. Federal Regulators banned its banking partner from making the loans.

Tax Preparers say the IRS is trying to discourage taxpayers from paying the high interest rates in these loans.

"They believe triple digit interest rates banks charging for these refund loans are predatory and should be taken out of the equation," Ness said.

Those interest rates can run between 50 and 500 percent.

They do sign off on disclosure page that shows them what the interest rate is so there shouldn't be any surprises and most people willing to pay an extra $100 to get money back," Ness said.

Ness thinks it’s just a matter of time until the federal government puts an end to refund loans altogether. He says the IRS does have ways to get people refunds faster that haven't been implemented yet.

No one locally from H & R Block was willing to comment for this story. However in an e-mail statement H & R Block has announced it will continue to offer a two-week Refund Anticipation Check and continue to develop other financial products to put in place by the early part of the tax season