IRS, Among Others, Catching Too Many on Other Side of Internet Divide

0623_tax-800x480New Orleans    The IRS has problems. I get that. Well hated as a necessary evil, the Republican Congress has cut their budget to the nub in recent years to make it harder to collect taxes. In the 2015 tax season millions rightly complained that they had a better chance of talking to Santa Claus long distance from the North Pole than getting the IRS on the phone to handle a question. But, we have problems with the IRS, too, and part of the problem is with their plan to go even higher tech with a system of online taxpayer accounts and even worse to outsource more of the work to third party tax preparers, who have done little to earn anyone’s trust of the years.

The Taxpayer Advocate, Nina Olson, an independent office within the IRS, points out the obvious about the IRS’s new grand plan reminding them that millions don’t have internet access so what the heck? And, these are some of the folks that might need the most help. The Advocate in her annual report zinged her IRS employer as trying to create a “pay-to-play” system and essentially accused them of trying to run away from Jane and Joe Citizen Taxpayer. She also noted that lower income families were already been targeted too often by unscrupulous tax preparers asking, “Why would we want to give these preparers even more access to taxpayer information.” From ACORN’s experience in negotiating with H&R Block, Jackson-Hewitt, and Liberty Tax Services – the big three – who the IRS probably see as the good guys – were the same outfits that invented and fought tenaciously to hold onto completely predatory products like refund anticipation loans by spitting on the IRS for being a couple of days slower therefore worth paying what might amount to 350% or more in interest to get your refund a wee bit earlier.

Let’s be honest. In solving consumer problems, the internet does not make it easier by one iota to solve a problem for anyone with any outfit, it just makes it cheaper for the companies by reducing the staffing account of real problem solvers. This is a job reduction program, not a problem solving solution.

A couple of days ago I spent 75 minutes on the AT&T website and chat room trying to get a bill which is to say, trying to give them money! And, that didn’t fix it. They claimed they had been trying to send me a bill by email, but never managed to get it to me. Two days later when I summoned my resolve to try again I was finally able to get the amount owed and the address to send it, but was only able to get it fixed when then finally gave me an 800 number and a woman named LaShonda to get me straight. Their money is now in the mail, and, no indeed, after all of that would I have ever trusted them enough to electronically send the money.

PayPal has to be one of the most sophisticated and seamless of the new internet tech companies in the Silicon Valley. They are giving away a device so that you will use PayPal at the point of sale. KABF, the great noncommercial 100,000 watt station said, good idea. We are now caught in the second day of a dispute resolution process because they want us to verify the address and social security number of the station, but only wanted a utility bill. No phone number to call. No person who can work it out. We have now sent them 8 different pieces of information via the internet, and the only thing they have accepted on the upload and checked, “resolved,” was a personal passport, which a noncommercial corporation doesn’t even have. Geez!

And, those are two of a gazillion examples just this week, and I’m at least as smart as the average bear and a couple of steps away from being a techno-peasant. We’ve already had the huge internet enrollment fiascoes on the Affordable Care Act, and now we’re going to move the whole online system over to the IRS. We haven’t crossed the internet divide yet, but I can assure you this plan will engulf us in total and abject horror on the other side of gulf, if we’re ever able to get there at all!

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H&R Block, HSBC, & the end of RALs

57334671TB002_Last_Minute_TNew Orleans Refund Anticipation Loans or RALs are a product that have preyed on lower income worker families since their inception and promotion by the big tax preparers, H&R Block, Jackson-Hewitt, and Liberty, as well as smaller fry who could get access to credit.  Negotiating with these companies could get depressing when I worked with the teams of ACORN members who the ACORN Financial Justice Center when better disclosure meant looking at a rate package that would be between 220 and 250% annualized.  There was never anything good about the products no matter what they were called, but their heartbeat was the desperate need of many families to have the money the few days quicker than it could be obtained from the IRS on an electronic or mail filing.

In a significant concession HSBC, the main lender to the large preparers, announced that it was departing the business in what they described to me, and I reported in Citizen Wealth, as “reputational” concerns.  Despite the fact that they were making almost $200M per year from this business, there was no way to disguise its predatory nature.  JP Morgan-Chase was another big player in a session where they were conceding that they would lower rates, asked me sarcastically if we thought it would be “better if they got out of the business,” to which we answered “yes!”  Santa Barbara Trust was the last major lender still hanging in the business.  HSBC has assured us that they were on a step down, transitional contract, which would pull them completely out of the business with H&R Block by the end of 2009 while they dropped other companies immediately.

Given that background, I was both disappointed and delighted to read the news from H&R Block that they were scrambling to replace HSBC as their lender and credit source for RALs for the 2011 tax season.  This should not have been a surprise to them, but it was a surprise to me to see that HSBC had continued to stand behind the RALs in 2011, long after they had assured me that they would be out of the business completely.  Clearly in the last 2 ½ years since I left ACORN the organization had taken its eye off of the target and the consequences had not been good for lower income working families who are dependent on professional preparers.  That is disappointing.

Delightful was seeing that the IRS finally did the right thing after having been an enabler to this thievery for so many years and eliminated a code this last summer that allowed tax preparers to know whether or not the likelihood was good that the filer would receive their entire refund sufficiently to cover the charges and fees being larded on by the preparers.  The IRS was effectively doing a low grade “credit check” for the preparers.  Disgusting!  Once they did that the Office of the Controller of the Currency (OCC), one of the many federal bank regulators, issued a determination barring HSBC and the like from such lending by classifying it now as too risky, despite a last minute contract extension that Block (after filing suit against HSBC for reneging on the contract) had negotiated with HSBC for the 2011 season where Block would cover all HSBC losses.  Finally the federales did the right thing!

Though this may be the death knell for RALs, which are a loan with interest, against the sums, some of the other predatory schemes will still survive.  Block announced that it would continue to fund refund anticipation checks, which are more like advances, through its own bank, the H&R Block Bank.

These predatory operations have been crack cocaine for the big-time preparers for years, so it will take some time and effort to cut the heads off of theses snakes, but at least more of the tails are now going.

Thanks to Eileen A.J. Connelly and David Pitt, AP personal finance writers for a great story on these developments!

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