Jackson Hewitt Unfazed By IRS Privacy Proposals

by Leroy Baker, Tax-News.com, New York

04 January 2008

Jackson Hewitt, one of America's largest tax preparation chains with over 6,500 franchised and company-owned offices throughout the country, has stated that proposed new Internal Revenue Service rules will not prevent it from continuing to offer refund anticipation loans (RALs) to its clients.

The company's assertion that RALs are here to stay came in response to the release by the IRS on January 3 of final regulations that update disclosure and privacy laws relating to preparers, and a proposal to restrict the marketing of refund anticipation loans.

"Jackson Hewitt believes that if this proposed rule results in regulation, it will not lead to the elimination of refund anticipation loans," the company argued in a statement issued in response to the IRS announcement.

Michael Yerington, President and CEO, added: "Jackson Hewitt firmly believes in the taxpayer's right to control their tax return information through a written consent process. We appreciate the opportunity during this comment period to advance consent use and disclosure requirements to ensure that tax return information is adequately secured, and to permit such taxpayers to make fully informed decisions about the use and disclosure of tax return information pertaining to the tax-related products and services that they choose."

However, the company's investors have seemingly taken a different view on the issue, and Jackson Hewitt shares fell to their lowest level in almost two years following the IRS statement. Meanwhile, shares in H&R Block, America's largest tax preparation firm, decreased in value by 4.7%, as analysts warned that new regulations could restrict the offering of RALs, shutting off a lucrative stream of income for tax preparers that offer such services.

RALs are short term advances that tax preparers can extend to their customers, typically those on low incomes, who then sign over their official tax refund checks when they are issued. Interest rates on such loans are high, equating to as much as 100% on an annualized basis, and have attracted strong criticism from governmental organisations and advocacy groups. The IRS proposal would limit tax preparers' ability to provide client tax return information to lenders that provide RALs.

Following a barrage of unfavourable publicity, tax preparation companies have begun to re-package their refund loan products, led by H&R Block, which cut its interest rates on the loans by 40% ahead of the 2007 filing season.

In December 2006, private sector partners in the IRS's Free File Alliance also agreed to remove ancillary offerings such as RALs from the free file program.

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