IRS plans changes for tax preparers, takes a closer look at refund anticipation loans

By Sheryl Harris, The Plain Dealer

January 04, 2010, 5:04PM

The IRS today announced several changes meant to protect consumers from tax preparation pitfalls.
Starting next year, the IRS will require paid tax preparers to register with it and take competency tests and continuing education classes.

The agency plans to take a closer look, too, at the tax software that consumers use to do taxes themselves. (Currently, the agency said, the only standards for the software are those imposed by the manufacturers.)
There's some particularly good news in the works for low- and moderate-income taxpayers.
The IRS plans to form a working group to study the marketing of refund anticipation loans, known as RALs, that give consumers earlier access to refunds in exchange for a sizeable chunk of their money.
David Rothstein of Policy Matters Ohio said the group could ultimately reign in marketing of RALs and similar, expensive products.

"One of the big concerns is a lot of times stores are rolling the cost of the RAL into the return," Rothstein said. "A lot of times a preparer just assumes you want the RAL if you are getting the earned income tax credit" offered to lower income consumers.

The changes could effectively bump car dealerships and furniture stores out of the tax preparation mix, he said. These companies sometimes offer "free" tax preparation services to consumers who agree to use refunds or RALs as downpayments on purchases.

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