"We first selected Gary Bode because of his familiarity with a creative financing scheme for our new small business. During our time with Gary, his insights have helped us better structure our small businesses, save money, and learn to be better small business managers. When it comes to small business accounting, a little hand-holding goes a long way."—Justin and Joelle LeBlancA congressional subcommittee asked the IRS commissioner about delays in tax refunds early in the tax season. Let’s look at the ramifications of those tax refund delays. The IRS eliminated key support for all those instant refund loans from third parties last year, so well promoted by the chain tax storefronts, correctly stating such loans were injurious to the public. And they backed that with guarantees of reasonably timed tax refunds directly from the IRS. Well, for a week in 2012, reportedly, the IRS had to rely on its older refund systems while they updated the current ones. At a crucial time, see below.
There is a whole culture in the US that relies on early refunds as a major family financial event. In the tax chains, for example, the Earned Income Credit, which generates thousands of dollars of refunds, over and above what the client paid in, is big business. The Council for Electronic Revenue Communication Enhancement, CERCA, which serves as a private liaison between the IRS and the electronic filing industry, reported verbal abuse to tax preparers by clients experiencing these refund delays. Tax chains apparently experienced physical threats too.
For years I’ve said the instant loan tax refund industry preyed on Earned Income Credit tax payers by funneling off 10% of those refunds. I feel this is unfair to the taxpayer whose refund is pilfered and other taxpayers who essentially pay the refund. Before I was a CPA I worked at a chain tax store for a season. I couldn’t persuade the Earned Income Credit customers, that, waiting four weeks to receive $4000 was better than getting $3600 today. I consider the Earned Income Credit an entitlement program, generally distributed to those in genuine need. But I’ve also seen fraud in obtaining it. And it can also be a disincentive to some folks against making the leap from earning $6000 a year to earning $30,000 a year.
It’s easy to criticize the IRS. It took courage for them to address the usury of instant refund loans. Sure, it’s irritating to have a delay in any money coming in. Sure, let’s look at how they operate. But a few kinks in the system in such a vast bureaucracy like the IRS are understandable. They do well considering they don’t make the rules but must administer massive and inconsistent directives from Congress.