The future for tax refunds is here.
Refund loans are on their last legs
Refund anticipation checks are next out the door as these debit cards come online.
What this means to HRB and the chains is lower profits from bank products.
It's a landscape that will be evolving. Possibly strewn with corpses of JTX,Liberty etc.
What's next? Flat tax? or Vat tax?
"The fee structure on the IRS prepaid card is similiar to that of the emerald card." ramsdude
I haven't worked for Block for awhile, but I don't think that's true. People can access cash at no charge at a giant network of ATMs with the federal card, whereas Block takes a fee from all ATM transactions. The federal card doesn't charge for checking your balance at an ATM or for speaking with a live person. Block does both. I'm sure there are other differences current employees can offer.
It's unclear to me what the new fed rules about putting refunds on debit cards will do to the tax prep chains. Supposedly a tax refund cannot be placed on a card that automatically triggers a refund loan repayment. So the debit card issuer cannot collect a RAL payment from a taxpayer who puts their RAL on the debit card. The IRS says that next year they hope to put into place a way for tax preparers to get paid from a federal refund = end of RACs.
Who is providing Block's RACs this year? They are imperative for the early season clients, many of whom cannot pay for tax prep out of pocket. It would be awful if a tax pro did all that work and the client had to walk because they had no way to pay.
"Everything the IRS is doing is aimed at one thing, and that is to kill the incentive the preparer has to commit fraud in order to overinflate the refund."
Yea, that's the ticket! Only the preparer commits fraud. The vast majority of bank products are sold by Block, Hewitt, and Liberty. The preparers for those tax firms have absolutely no financial incentive to sell those products. Block preparers don't receive compensation for opening emerald card accounts.
The fee structure on the IRS prepaid card is similiar to that of the emerald card. Both are horrible products made available to customers with no bank account and a horrible credit rating. The main difference is that the IRS chooses which bank you can go to for these products instead of the free market.
No, this new IRS policy of refusing to provide the debt indicator along with the expanded role of the IRS in the financial services sector has nothing to do with the IRS. It's the federal government slowly expanding its influence in the lives of the average American and to transfer economic viability from the free market to the government.
Be careful for what you wish for because you won't like what you get.
It has always been against Circular 230 to charge based on the refund except in the case of an amended return. Now that the IRS is putting everyone under Circular 230 a few people will have ot clean up their acts!!! I am not talking about unlicensed preparers but CPAs and lawyers.
It irritates me that they have not been enforcing the rules since e-filing started because one of the ERO rules was to follow Circular 230.
To foolow the previous post. This will effectively kill the SCAM riddled tax refund business as we know it. When preparers are no longer able to charge SCAM level prices they will all go out of business. This will usher in a new industry that is based on tax preperation and not refund loan industry. Fraud should be greatly reduced and hustlers will leave the industry and allow real Tax Professionals to take over.
It looks like the Debit card is going to have the ability to pay the prep cost and then disburse the rest to client (I thought IRS had announced that next year it would be set up, but this year is the 600,000 test pilot of program.
IRS has publicly stated that they want to make a product similar to a RAC, but at no cost. The RAC is short lived, and Republic within their 10Q has acknowledged this fact. If the IRS gets to where they pay within a week, the RAL is doomed. It is probably doomed, anyway. All that is fine with me. The customer saves money, and I get my fee quicker. Win Win.
The pilot is being underwritten by a bank:
"The Visa card will be issued by Utah-based Bonneville Bank, and the Treasury will work with prepaid card provider Green Dot Corp. during the pilot."
HRB returning clients with Emerald Card have that same option, BUT they STILL opt for RALs and RACs, which means no out of pocket expense to prepare your tax return. IRS and bloggers here seem to have forgotten that.
None of the preparers make anything on the assisted refunds. Most preparers will be glad to see the IRS assisted refund. Most taxpayers (like you) still think the preparers share in the bank charges. Not so.
I posted many weeks ago that US Gov't wants to take all the unfair $$$$$ out of
RALs, loans, etc.
Just because people want refund $$$ unreasonably fast, doesn't mean
a Co. has to gouge, or even get what vig stressed folks will pay.
What Uncle Sam wants is: Go make your $$$
Like I proposed before,
HRB and others will have to raise fees for
all customers to make-up $$$$.
This is simple math.
Block should see the writing on the wall and start working on a "long-term" plan of being a "tax preparation" company again. Of course, there will be a short term stock hit, so they won't do anything long term.
I think Block can survive as a smaller company if it changes it's focus. JH is toast once the RAL's completely dry up. Like Block, Liberty will also have to change course and they don't have the financial resources that Block has. I think if I owned a big 3 franchise, I'd start saving my money - 5 years from now doesn't look so great.
JH could have one more decent year. Their ads on TV are really taking their toll on Block. If Liberty were to ever do national advertising, now would be the time. Interesting times to say the least! Small CPA firms are probably having a good time watching this unfold.