IRS removes refund loan solicitations from e-filing programs

Tuesday, December 5th 2006, 10:26 am

By: News On 6

WASHINGTON (AP) _ The Internal Revenue Services and private tax preparers have agreed that a free electronic filing program will be offered for 2006 tax returns without solicitations for refund loans that sometimes carry high interest charges and fees, the IRS said Tuesday.

The IRS said the Free File Alliance, a coalition of tax preparation software manufacturers that make their software products available for free, would no longer include side offerings such as Refund Anticipation Loans in their programs.

Such loans let customers immediately take home an expected refund. But consumer groups have complained that some loans come with high interest rates and fees.

``We heard many legitimate concerns about the marketing of ancillary products during the last filing season,'' IRS Commissioner Mark W. Everson said in a statement. ``This is a constructive step.''

The head of the Free File Alliance, Tim Hugo, said that with the voluntary elimination of RALs, ``the Free File Alliance takes another giant leap forward on behalf of the taxpaying public.''

The IRS said its data showed that only 0.5 percent of Free File users requested a refund anticipation loan this year in filing their 2005 tax returns.

The Free File program enters its fifth year in January. It is available to taxpayers who earn $52,000 or less, about 70 percent of all returns. Taxpayers must enter Free File through the IRS Web site, http://www.irs.gov.

About 3.8 million taxpayers used the Free File program this year, still a small percentage of the 70 million taxpayers who filed returns electronically.

Under the agreement with the tax preparers, the alliance can still offer customers the option of having their 2006 state tax return prepared for a fee.