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Lev, Tax Advisor
Category: Tax
Satisfied Customers: 28081
Experience:  Taxes, Immigration, Labor Relations
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I have recently looked into offering a rapid anticpation loan

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I have recently looked into offering a rapid anticpation loan product to my clients. I know the IRS has been eliminating these pracitces over the last couple years. Most banks do not offer loans any longer. Is it legal to offer and fund the loans myself through my company?? I would then withhold the loan from the refund proceeds..... a second question is what documentation do I need to withhold tax prep fees from the refund?
Submitted: 5 years ago.
Category: Tax
Expert:  Lev replied 5 years ago.



Hi and welcome to Just Answer!
The issue with RALs - Refund Anticipation Loans is that previously when tax returns were accepted - the IRS sent an indication if a tax refund would be held up for some reason. This indication was used by banks when decided to issue the loan or not.
Eliminating such indication in 2010 made RALs more risky - and that is why most banks run away.
As a tax preparer - you may not have tax refunds deposited to yours or your company's account and because you are not a bank - you may not issue loans (except customer loans - for the value of services the company provided).
Here is IRS position on RALs -,,id=205563,00.html .
Actually - you may only provide services without upfront fees and have customers pay you later.
The remaining alternative is a RAC - Refund Anticipation Check - the bank opens an account for the taxpayer and accept tax refund into that account, after that - tax preparation fees are taken out - the only difference - that customers gets the money only after tax refund is sent by the IRS - so there is no loan.

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