Debt indicators aren’t going to be accessible anymore as the information the IRS gives out about taxes and other debts owed. Someone who has a fantastic tax refund may have it all held by the IRS because of debts owed or back taxes and is told through debt indicators. Banks trying to determine whether to give somebody a short-term loan depending on their tax refund will use debt indicators to make their decision.
Debt indicators not allowed in 2011 tax season
August 5, the IRS explained that there won’t be any more debt indicators beginning with 2011 taxes because they aren’t important anymore. Taxpayers can get their taxes in just a few days with electronic filing and direct deposit. There is no need for refund anticipation loans with this. Companies that profit from refund anticipation loans say the elimination of debt indicators limits an essential service they offer to the unbanked and underbanked.
Delinquents pointed out with debt indicators
Refund anticipation loan banks will use debt indicators to choose all the major factors around a loan they are loaning out. Unpaid debts like unpaid child support or school loans can be paid with one’s tax refund, and a debt indicator from the IRS shows that to the preparer if it is going to happen, the Journal of Accountancy reports.
IRS doesn’t approve of refund anticipation loans
Numerous people criticize short term refund anticipation loans because it appears silly to charge such high interest and fees for giving out a loan just a couple days before a tax refund arrives. Refund anticipation loans fees were paid by 8.4 million individuals in 2008 totaling a total of $ 738 million, reports the National Consumer Law Center. The Associated Press talked to IRS Commissioner Doug Shulman who said that those who are considered low-income are the ones targeted by anticipation loans. The longest it would take to get a tax refund would be 10 days when filing electronically and getting direct deposits. He also said:
“I think it’s unfortunate that there’s a lot of hardworking Americans that are in a financial situation where they have to pay a substantial fee to access their refunds a week or two before they can get it from the IRS.”
Refund anticipation lenders unhappy
Debt indicators are used by companies using refund anticipation loans to determine which individual that is strapped for cash is going to get a loan. Alan Bennett, president of H and R Block, told MarketWatch that taking away debt indicators only hurts those with low refund anticipation approval rates and will also give higher costs to other taxpayers. He said these consumers are often unbanked or under-banked and will be forced to seek more costly and unregulated credit. This debt indicator problem will make H and R Block shares go down in 2011 5 cents a share going down 3 percent.
Further reading
Journal of Accountancy
journalofaccountancy.com/Web/20103174.htm
Associated Press
google.com/hostednews/ap/article/ALeqM5gZhidWFh-omq3dh3M486iDXA4JbAD9HDHDKG0
MarketWatch
marketwatch.com/story/hr-block-responds-to-irs-elimination-of-the-debt-indicator-2010-08-05?reflink=MW_news_stmp
