Talk about biting the hand that feeds ya.
H&R Block, the nation’s largest tax preparation firm, is seeking a court order that will force HSBC (Hong Kong Singapore Banking Corp.) to provide funding for the RALs (Refund Anticipation Loans) and RACs (Refund Anticipation Checks) during the 2011 upcoming tax season. These RALs and RACs are a major source of funds for H&R Block (HRB).
During the past tax season, it is estimated that HRB and their banking partners provided between 3 and 4 million RALS to taxpayers seeking rapid refunds. The pending inability of HRB to offer these rapid refund products will have considerable effect on the tax preparer’s profit.
HSBC signed an agreement in 2005 with HRB to provide these loan services. The IRS created this kerfuffle when it decided to no longer provide Debt Indicator (DI) information to the financial institutions which underwrite RALs and RACs. HRB contends that information is not required to make the loans. The bank making the loan without the benefit of the DI information will not know if the anticipated tax refund will be held by the IRS in part or total as a result of a tax setoff (old tax bill, child support, education loans, state tax liability, etc.).
Jackson-Hewitt, a HRB competitor, experienced RAL and RAC problems last tax season as a result of the Santa Barbara Bank & Trust being directed by regulators to get out of the RAL and RAC market.
This upcoming tax season stands to be challenging for the taxpayer, preparers, the IRS and Congress.
Tax Wisdom: There is no worse tyranny than to force a man to pay for what he does not want merely because you think it would be good for him.
– Robert A. Heinlein