Tax Refunds Can Be Worth Their Wait in Gold

H& R Block says its typical refund anticipation loan costs about 2 percent of the principal. But consumer groups say interest rates can range from 40 to 500 percent. (By Ramin Talaie -- Bloomberg News)

"We've got to look at whether the RALs are causing a problem," Williams said.

Williams said the IRS is considering prohibiting tax preparers' involvement with RALs. The agency doesn't have the authority to ban the product, but it can forbid tax professionals from directly selling or marketing the loans.

Under the proposal, "if you prepare the return, you can't obtain taxpayer consent to process the RAL," Williams said.

He added that the agency also plans to do its own research to determine whether tax laws are being broken by tax advisers or tax preparers trying to maximize refunds to boost RAL income.

Even when a flat fee is charged for RALs, some tax preparers could be inappropriately inflating the amount of a refund to boost their business in other ways, the IRS said. For example, some merchants who offer tax-preparation services may encourage customers to obtain RALs and spend the funds on the merchant's other products or services.

If you want to comment on the proposed rule, suggest something different or expose an unscrupulous tax preparer who has taken advantage of you through a RAL, send written or electronic comments to the IRS by April 7. You can mail comments to: Room 5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, D.C., 20044. You can also submit comments at http://www.regulations.gov. In each case, you need to reference REG-136596-07.

Williams said that if the IRS does move to rein in the marketing of RALs, taxpayers probably won't see any changes until the 2009 tax season.

Keeping in mind what Baldwin said, I hope the IRS moves faster on this issue. The longer they take to restrict the marketing of this useless product, the more it costs the poor.

¿ On the air: Michelle Singletary discusses personal finance Tuesdays on NPR's "Day to Day" and online athttp://www.npr.org.

¿ By mail: Readers can write to her at The Washington Post, 1150 15th St. NW, Washington, D.C. 20071.

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