Well the end of the year is fast approaching and before you know it tax season will be upon us again. As I prepare for the upcoming season, I having been in debate on a tough topic. I am trying to decide whether to offer Refund Anticipation Loans(RALs) for the upcoming season.
The past year has really brought the issues with this bank product to the forefront. H&R Block stopped offering this product last year because the bank backing them, HSBC was ordered to stop making these loans. However, these loans were still offered by Jackson Hewitt and Liberty Tax Service and other tax preparers via their software supplier, such as Drake and CCH Taxwise.
A couple of things happened that caused these issues with the decline in the RALs. First the IRS stopped providing preparers with the "debt Indicator" which warned whether taxpayers had financial obligations that would cause their refunds to be intercepted by the IRS. Regulations efforts by the FDIC about the practice. The top lenders stopped offering RALS last year such as Chase, SBBT, and HSBC. The only one currently offering the product is Republic Bank and Trust.
The FDIC is seeking to impose a $2 million fine against Republic. Republic is appealing this decision and plans to continue offering the product for the upcoming season.
With this in mind, I don't think the RAL is a good idea. Due to the added cost and fees I will offering this product. It is likely to not even be an issue after next year pending the result of the Republic case. Furthermore, I think these loans are predatory. There are more less expensive ways to get your refund than paying these enormous loans fees. In general it depending on the timing you can having you refund direct deposited into your bank account with 7 days. Just being a little patient can save you a lot of money. It is also my understanding that the Treasury Department is planning to offer a debit card program whereby your refund will be deposited onto this card by the IRS. I believe this is pilot program directed initial to low income families probably without a bank account. I will have to check into the status of this program.
I am looking forward to a successful tax season. Looking forward to hearing from you. Tell me your thoughts on this subject.
Well tomorrow is the last day to efile your 2010 tax year return. The next tax season is fast approaching. It's never to late or early to get prepared for the upcoming tax season.
The upcoming tax season will bring about quite a bit of change especially for the professional tax preparers. The paid preparer requirement will be enforced and those non-circular 230 preparers will have to be tested. The PTIN registration requirement will continue, however testing will be required and will have to be passed in order to hold the Registered Tax Return Preparer (RTRP) designation. There will also be continuing education requirements implement later on.
The IRS will start accepting efiled returns on January 14, 2011. Those that are affected by the recent tax laws will have to wait until mid-February to efile their returns. This includes individuals that claim Itemized Deductions, the Higher Education Tuition and Fees Deduction, and the Educator Expense Deductions.
Furthermore, for returns efiled, processed and accepting by the IRS by 11:0 am EST on January 20 will have their refunds direct deposited by January 28 unless their are problems with the return.
Sell off loser stocks this year to reduce capital gains exposure.
Pay your personal property taxes before year end (car tag).
Make charitable contributions (cash & noncash) before the end of the year.
Pay as much towards any outstanding medical bills in 2010.
If you are a high-income earner, consider converting your traditional IRA to a ROTH IRA.
Pay January’s mortgage payment in December so you can deduct the interest in 2010.
Contribute to your retirement plan.
If you are self-employed, stock up on office supplies and make other necessary purchases before year end.
If you have a FSA (Flexible Spending Account), make sure to use up all the funds before 2011. Also, stock up on OTC (Over The Counter) meds, because one of the 2011 FSA changes is that you will no longer be able to use it for OTC meds unless you have explicit instructions for use by a doctor.
The tax bill has passed and is heading for Obama's signature. The bill extended the Bush era tax cuts that were due to expire on Jan 1, 2011 for another 2 years.
The tax cuts included lower tax rates for everyone, tax breaks for college students, and lower taxes on capital gains and dividends. Furthermore, Social Security taxes have been cut from 6.2% to 4.2% for 2011. This means you will receive more take home pay as a result of the lower rate.
Perhaps this legislation is good for economic and job growth but that remains to be seen. The estate tax is where the biggest concern is, allowing estates to pass $10 millions to heirs tax free.
With the new bill extending the cuts for 2 years, would make for an interesting election year in 2012.
The new tax season is fast approaching. I will soon start blogging regularly on tax related topics for the upcoming tax season. Other accounting, finance and bookkeeping topics may come up as well. Looking forward to talking with you all some.
Haiti Relief Donations Qualify for Immediate Tax Relief
People who give to charities providing earthquake relief in Haiti can claim these donations on the tax return they are completing this season, according to the Internal Revenue Service. Taxpayers who itemize deductions on their 2009 return qualify for this special tax relief provision, enacted Jan. 22. Only cash contributions made to these charities after Jan. 11, 2010, and before March 1, 2010, are eligible. This includes contributions made by text message, check, credit card or debit card. The new law only applies to cash (as opposed to property) contributions. The contributions must be made specifically for the relief of victims in areas affected by the Jan. 12 earthquake in Haiti. Taxpayers have the option of deducting these contributions on either their 2009 or 2010 returns, but not both.
Low- and moderate- income workers can be eligible for the Earned Income Credit (EIC). EIC is a refundable credit meaning that the amount of credit that is greater than the taxes due (owed) is refunded to the taxpayer.
The amount of the credit depends on the taxpayer's Adjusted Gross Income (AGI) and the number of qualifying children. You may qualify if you earned less than $48,279 for 2009. New for 2009 is the additional benefit for the 3rd qualifying child. The maximum credit is $457 with no qualifying child, $3043 with one qualifying child, $5028 with two qualifying children, and $5657 with three or more qualifying children.
Remember, EIC is not available for the married filing separate status. Also note the qualifying child does not have to be a relative.
Contact your tax professional today for assistance.
The IRS will start accepting efiled tax returns on Friday, January 15, 2010. You will need your actual W-2 in order to efile your return. The IRS will not accept last pay stubs for efile processing. Also, note that returns filed between January 15 - January 21, direct deposits will process on January 29 and paper checks on February 5.
