| A couple years ago the Milwaukee Journal Sentinel ran | | | | assisting you as best they can to meet your tax |
| a story about Rapid Refunds entitled Poor Workers | | | | burden is part of their job. |
| Got Fast Cash at High Prices. I was really shaken by | | | | Though still subject to error, the IRS is methodical. |
| the following. | | | | Sometimes this translates into what the consumer |
| "Nearly $2 billion in tax credits earmarked for | | | | sees as slow. But the IRS is definitely methodical and |
| low-income workers instead went to businesses that | | | | will eventually right any wrongs. |
| offer high-interest loans against pending tax refunds | | | | Therefore the first two cardinal rules when dealing |
| [Rapid Refund], according to a new study by the | | | | with the IRS are:a. Regardless of the reason to be in |
| Brookings Institution and the Progressive Policy | | | | contact, treat the IRS as people. Give them the same |
| Institute.... Fees on those loans amount to annual | | | | dignity and respect you deserve and that anyone else |
| percentage rates of 67% to 774%, according to a | | | | deserves.b. File on time.... even if you do not have the |
| recent report by the Consumer Federation of America | | | | money. This puts you on a much firmer basis than |
| and the National Consumer Law Center." | | | | contacting them when you have not even filed. You |
| Rapid Refund | | | | might be interested to know that the IRS has six years |
| Another name for Rapid Refund is Refund Anticipation | | | | from the due date of the unfilled to file criminal charges |
| Loans or RAL. Assuming you are using a Rapid | | | | against you. |
| Refund tax-preparing agency, It is very standard to be | | | | 2. If you cannot pay your taxes, you can request a |
| asked if you want a Rapid Refund. So automatic is | | | | payment plan for up to 36 months. You will pay |
| this pattern that the rest of the sentence is often not | | | | interest but far less than paying by most credit cards. |
| even needed included- just simply, "Rapid Refund?" | | | | The collection arm of the IRS that you will deal with in |
| I know I have heard it. This was just before I politely | | | | repayment is the Automatic Collection System (ACS). |
| said, "Thanks, but no thanks." There is no discussion on | | | | You should be contacting them before they contact |
| the cost of the Rapid Refund, what the Rapid Refund | | | | you. But do not ignore a letter or contact from the |
| interest rate is, or even the fact that you could get the | | | | ACS and be likeable when dealing with them. It is |
| same money without a Rapid Refund in as little as 9 | | | | definitely to your advantage! When requesting |
| days. You don't even see the Truth In Lending | | | | payments insure you have your assets and liability and |
| statement until after signing the agreement. It is all so | | | | suggested repayment plan in mind or it will be a waste |
| automatic.... And oh so lucrative. | | | | of everyone's time. |
| I read someplace that a former H&R Block employee | | | | The tax audit time limit is 3 years from the original filing |
| reported that folks would come in at the end of | | | | unless you have underestimated your tax liability by |
| December or first week of January with nothing but | | | | more than 25%. In this case it is 6 years. Audits are |
| their last pay stub. Forget the W-2. That's too slow. | | | | usually conducted because of an irregularity on your |
| Just "Gotta get that Rapid Refund." What's wrong with | | | | return such as excessive expenses for your income, |
| this picture? | | | | excessive improper deductions or exemptions or a |
| Worse Than Loan Sharking | | | | specifically targeted group by the IRS. There is also |
| A while ago I wrote an article called Worse Than Loan | | | | the chance of random selection. |
| Sharking. The introductory paragraphs said: | | | | The IRS has a very long reach and can check |
| "Loan-sharking" equates to usury, which is charging | | | | records from numerous sources such as employers, |
| interest above an established legal rate. "Pay | | | | relatives, former spouses, friends, government |
| Advance", "Check Advance", "Deferred Deposit" or | | | | agencies, financial institutions, etc. Therefore, do not lie |
| any other label like it is lower than loan-sharking. It is a | | | | but at the same time do not volunteer information. And |
| legal, multi-billion dollar industry that you don't want to | | | | always, always, always, abide by the rule above.... treat |
| get lured into.... | | | | the IRS as people. Give them the same dignity and |
| As a young GI in Korea years ago, I remember none | | | | respect you deserve and that anyone else deserves. |
| of us had much money. Gambling and "other pastimes" | | | | Some time after the audit you will receive the results |
| took the little we had before month's end. But there | | | | by mail. You have the option of appealing the audit, |
| were always the "friendly", black-market loan sharks | | | | which could take up to a year to hear. Meanwhile any |
| offering 50% interest loans. Guess who was always 5 | | | | additional tax burden will accrue interest. An appeals |
| feet away from the pay station on pay day?" | | | | officer of the IRS will hear your appeal. You will |
| There is little difference in stories between the article | | | | present your facts as to why you feel the audit is in |
| above and Rapid Refund articles such as this or in | | | | error. If this appeal fails you can either fight the findings |
| "Rapid Refund Scam" at the site Eat the State. In this | | | | in tax court or negotiate a settlement. |
| latter article, a report about one company said: | | | | 3. Key Terms - Often times knowing what to ask for |
| "Thus a taxpayer with a $600 refund would pay about | | | | can be half the battle in talking to the IRS. Here are a |
| $75 in finance charges, plus $50 in tax prep fees (for | | | | few key terms which may help. |
| the simplest return) just to get a check for only $475 | | | | Penalty Abatement -. Abatement is the elimination or |
| nine days sooner. The annualized interest rate would | | | | reduction of tax penalties and can be for any reason. |
| be about 450%!" | | | | In order to apply for penalty abatement, write a letter |
| Here is a thought: What happens if IRS disallows | | | | to the local IRS service center with justifiable reasons |
| deductions and your refund is reduced? You still owe | | | | why your tax burden is not correct or the reasons |
| the loan plus interest. But now you are even further in | | | | surrounding your need for abatement. Send a second |
| the hole because your RAL is less than anticipated. | | | | letter if there is no response within 60 days. |
| Where Is The Benefit To RAL? | | | | Tax Liens and Levies - are two methods of tax claim |
| The IRS will usually send out refund checks in an | | | | enforcement by the IRS. A tax lien is filed at the local |
| average of 21-45 days. If you need the money sooner, | | | | county recorder so that you cannot sell your home or |
| electronic filing should get your refund check to you in | | | | even borrow against it without first paying the lien. The |
| less than 21 days. If you choose to have your refund | | | | lien statute of limitations is 10 years. As bad as a tax |
| deposited directly into your bank account, it can be | | | | lien is, it is nothing compared to a tax levy. A levy is |
| done in 8 days or possibly less. | | | | seizure of your property other than wages (which is |
| Consumer Federation of America once had a | | | | garnishment). The property can then be sold within 45 |
| comment about Rapid Refund that I always felt | | | | days. Certain properties such as some furniture, tools, |
| appropriate. They said: "Don't spend your money to | | | | etc. is exempt from levy. |
| borrow your money to have it a week or two faster." | | | | Offer In Compromise (OIC) - An Offer in Compromise |
| Black Market Opportunities | | | | is essentially a negotiation or settlement for less than |
| In preparing this article I did a key word search on | | | | what is owed. In the case of an OIC it may be wise to |
| "check advance". I stumbled upon a great title called, | | | | utilize a tax professional as there is much to be gained |
| "Job Opportunities in the Black Market". In it was the | | | | in doing this correctly. The key is to offer more than |
| following: | | | | what the IRS would get from a levy. Part of the OIC |
| "Sadly, the only industry that makes credit card | | | | also is how much you could pay the IRS monthly over |
| companies look friendly is the pawn-shops and check | | | | the next 5 years. |
| cashing services industry. Just like lottery tickets (tax | | | | Bankruptcy and Tax Court - There is one other point |
| for the poor), these businesses thrive in economically | | | | often times misunderstood about taxes. Tax burden |
| repressed areas." | | | | on occasion can be discharged under chapter 7 |
| It would seem Rapid Refund operations fit right in. | | | | bankruptcy. If the filing occurred on time but 2 years |
| Dealing With The IRS | | | | before the bankruptcy, the tax debt is over 3 years |
| On occasion you may have to deal with the IRS. It | | | | old, and the debtor is not a tax protestor, discharge |
| may be as simple as a notice that you did not sign | | | | may be possible. However tax liens cannot be so |
| your tax form or maybe more complicated as with an | | | | discharged. If you file and IRS has placed a lien against |
| audit. In any case some ground rules should first be | | | | your property, though the debt is technically discharged, |
| established within your own mind. | | | | the lien will continue. |
| 1. IRS folks are people also. Some are motivated and | | | | The final tax option after an audit and an attempted |
| some are not. Some are sharper than others. Some | | | | OIC is Tax Court. Half of all cases appearing in tax |
| have more experience than others. On any given day | | | | court result in lowering the tax burden. On the other |
| some will be in a good mood and some will not. IRS | | | | hand interest accrues while waiting for the entire |
| deals with millions of phone calls and letters annually. | | | | process to take place. Tax court is applied for at your |
| They often must deal with antiquated computers and | | | | local IRS service center and like any other dealing with |
| angry consumers. Most are their to do a good job and | | | | the IRS requires form to be filled out. |