So, boys and girls, have you looked at the IRS' processing situation for the 2013 filing season? They will not begin processing returns this year until January 22. They are further advising that they will take up to 21 days to release refunds. Presumably this is in response to the massive identity theft fraud they've experienced the last 2 years. So customers will now be told that they may not have any money from their tax filing until February 12. How do you think that is going to go over? What do you think the competitive situation will be if Jackson Hewitt and Liberty Tax have loan products of some sort to offer? This may be a very ugly start to a tax season. Do the tax industry analysts even look at this kind of stuff? The stock had been bid up impressively recently. I'd think it might be in for a fall once the investors realize the kind of storm that is looming on the horizon.
I have not found where Hewitt plans to do any refund anticipation loans, but Liberty certainly is going to try. They are going public to try to pay for processing RACs in house, and they already experimented with doing RALs through a third party payday lender, which they intend to do full scale in 2013. Of course it would not be the same as a normal RAL. The third party lender is taking even greater risk, because the disbursement from IRS couldn't go throught the lender by IRS rules. They would have to trust the lendee to pay them when the money comes in. I even used this means to provide for cash when one of the clients was in immediate need of some cash for emergency purposes. Sent them next door to a payday lender for which I received nothing in return. The lender agreed to do it as we have been neighbors for so long. The very LAST resort for any client, as the interest rate is incredibly extreme. I certainly don't intend to advertise it, or recommend it. If Liberty wants to go this route, it would seem counterproductive, long term. However, by adding on a bunch of extra debt, they will be extremely "at risk" starting Jan 2014.
As to the time it takes to get the returns, I doubt it will be any different from last year, except the clients will know better, beforehand. I had to field all the calls of "where's my refund" last year, and the 21 day delay time started, unexpectedly, at the onset of the tax season. Some received it within the normal cycle, but not the majority Other than the expected massive retroactive problems which will be encountered with trying to avoid the fiscal tax cliff, the 2012 tax year season should be about as much as a mess than the 2011 tax filing year was.
Do the industry analysts figure in problems that IRS and Congress produce to the industry? I have not seen one circumstance in which they even try to understand the problems, and what they may mean to the industry. Take the RTRP exam, for example. It is never mentioned in any analysis by "experts" that I have read. Out of the 350k PTINs, probably only about 250k are really pertinent to whether there are enough tax preparers. While, I agree that Block and the other two will provide the majority of ending numbers of RTRPs by Dec 2013, my estimates still do not include any more than about 75k RTRPs by that time.While it may take after the 2013 tax season for the existing RTRPs to become aware of their value, it will happen. The new big chain competitors will eventually be their own employees. There will be some decrease in returns prepared, because there won't be enough return preparers to handle it all. To keep the return preparers, the chains will have to pay more. That is why I said Liberty will be more "at risk" by taking on additional debt in 2013. Exact numbers can't be predicted, but probable trends should certainly be obvious to anyone who has studied accounting or economics.
I can't make much sense out of your first four sentences. Companies don't go public so they can process RACs in house. RACs require a depository account, which requires a bank. There are plenty of banks that can do RACs. And nobody is going to loan on refunds and then depend on the borrower to come in and repay the loan. That's not how it will work. I suspect there will be a contractual connection between the RAC bank and the finance company to authorize repaying the loan. I do expect that Hewitt will be creative enough to be able to offer fast money to customers, regardless of the details. Whether is it a competitive advantage will remain to be seen.
I plan on telling my clients a minimum of 3 weeks. My guess is Congress will want to extend some of the tax benefits for 2012 that were set to expire at 12/31/2011. This will, of course, cause the IRS to delay filing on some items until the middle of February at the earliest.
As far as the RTRP shortage goes, depending on the numbers, the IRS may well cave in and give tax return preparers yet another year (12/31/14). In my district, there are more people that have passed the EA this Fall than the RTRP. In talking to a few people that haven't taken the RTRP, they all say they will "probably" take it next year, but they'll just have to see how it goes. Several hinted they probably will just retire.