Corruption: Mystery Shoppers Expose Refund Anticipation Loan Abuse

As an educated consumer you may wonder why people would choose to use a Refund Anticipation Loan when they can e-file and receive their refund in only a few days.

According to a new secret shopper study being reported by the National Consumer Law Center, there is evidence that consumers are being systematically mislead into signing up for Refund Anticipation Loans and that other, more consumer friendly options are not being disclosed.

Secret shoppers who visited tax preparers (including Liberty Tax, H&R Block and Jackson Hewitt) in Philadelphia and North Carolina were given inaccurate information about their refund options and were not told that a “RAL” was actually a loan. Several of the tax preparers also made serious errors processing the returns.

“Two testers were required to file amended returns to fix errors and one tester withdrew after the preparer advised him not to include investment income on a return, essentially recommending tax fraud,” the report says.

The stories told by the secret shoppers are troubling. Preparers used misleading language to try to hide the free e-file option, or, in some cases, simply refused to disclose it. In one case, the option that looked like “free e-file” turned out to be something called a “Refund Anticipation Check”:

Another tester reported: [KH] was asked to fill out a two-sided form with her personal information. On the back of the form were three options she could choose for receiving her tax refund, described as: (1) RAL (24-48 hours), (2) Direct Deposit (10-14 days) and, (3) Check by Mail (6-8 weeks). The fees for the various options were not disclosed, so [KH] asked the tax preparer if she had a fee schedule. The preparer told her that a fee schedule was not available, but all of the fees would be broken down for her once the return had been prepared. The “Direct Deposit” option turned out to be a RAC, not the free e-file, direct deposit option. Later on, after the preparer finished completing the return, she again reviewed the options for receiving the refund proceeds, but this time omitted the free “Check by Mail” option.

You can read the entire report (PDF) here.

Mystery Shopping Test on RALs; IRS Comments [CL&P Blog]


Edit Your Comment

  1. Wormfather says:

    Jeeze these people are slimey.

    Turbo Tax people, it easy and you save a crap load of money.

    I did my taxes with Jackson Hewitt years ago and spent the next month wondering if using them was an automatic audit trigger.

  2. Pro-Pain says:

    NEVER let these money grubbing tax places do your taxes. They are just there to extort FEES, FEES, FEES!

  3. Traveshamockery says:

    This is very bad. These tax preparation places are so scammy and need serious regulation. And I’m not a fan of business regulation.

  4. Seems like a good argument to simplify the tax code.

  5. chiieddy says:

    @Wormfather: You still have to be careful with TurboTax. They’ll try to get you to put your refund on a gift card.

  6. Pro-Pain says:

    The tax code NEEDS to be simplified. It makes our Government look so stupid. Geesh, I’m almost ashamed to be American these days…

  7. bonzombiekitty says:

    I wonder how they managed to make it seem that a refund anticipation loan was not a loan. Did they always refer to it as an RAL?

  8. Parting says:

    Either get a real accountant, which specialized in taxes, or do them yourself. NEVER USE H&R. They are bunch of incompetent people, with little training. It’s not worth your money. You can’t screw worse than them.

  9. char says:

    Ugh. I’m going to H+R Block today because i have some weird tax issues this year (moving cross country, living in NY, but working for a company in CA). Thanks for this article I’ll keep my head out.

  10. joeblevins says:

    Agree with Victo, either get a REAL Tax Expert or do it yourself. The people in the little chain tax offices are just seasonal temps with quick training on using the software. Ask if they are CPA’s.

    TurboTax was free. Granted I don’t have a complicated return. Just 2 kids and a house. But still, it was easy. Scary seeing people line up at those places.

  11. joeblevins says:

    I have done 2 state taxes before with Turbo Tax. Try to research it there first before H&R.

  12. SacraBos says:

    Box 1, How much money did you make.
    Box 2, Send it in.

    Is this a good place to assert a wish for a flat tax?

  13. TheBestMaxEver says:

    Sometimes common sense just isn’t there. Look at these places leading up to tax season. Their marketing and newspaper ads all reflect “No Hiring – No Experience necessary” – My secretary got a part time job for H and R block a few years ago. They “trained” her for 5 whole days on how to use the same tax software you can buy in the store or from their website. She in turn got paid $10.00/hour to prepare taxes. These people are not accountants. You’re lucky if they have a high school diploma. Why would you want a stranger that is set up in a Sears or in front of Wal-Mart in a cubicle to handle such an important financial transaction. Try using Turbo Tax software or doing it by hand. If it’s too difficult for you pony up and let a real accountant do your taxes.

  14. punkrawka says:

    I sure hope someone at the bif tax prep companies is taking this seriously.

  15. punkrawka says:

    BIG, not “bif.” Sorry.

  16. madanthony says:

    Interesting read, but I wish the report had all of the summaries – it would have been interesting to read the experiences the shoppers had the ones that didn’t suck as much.

    I do have to say I’m amazed that people pay for tax prep – turbotax is $30 and super-easy to use.

  17. robocop is bleeding says:

    Oh man, “I got people” and they’re all scumbags!

  18. howie_in_az says:

    After having a family friend do my taxes for years, I just finished two returns via TurboTax. Couldn’t have been easier, and had I not misplaced some paperwork (car registration notice springs into mind) I could have taken even more money out of my taxes.

    In fact, I’m starting to think that 2005’s return, the last year I used the family friend, should have been far greater than it was, but I don’t want to cause any ripples in the Circle Of Trust by suggesting it.

  19. scoopjones says:

    Even cheaper than TurboTax? Go to the IRS web site and use FreeFile. The private firms it refers you to do the federal for free, but charge $12 for state. I usually end it after the federal and go to the California state tax site and do the state there for free too! With direct deposit, I got my refund in three days.

  20. KCJMAC says:

    @howie_in_AZ – why not recalculate 2005 yourself and if you have money coming file an amended return?

  21. scottr0829 says:

    @scoopjones: I thought there were limits on the free filing – like $50k or something?

  22. Khaos813 says:

    I got a RAL and the fees weren’t that bad. My taxes have been prepared at H&R block for the past 3 years and the RAL is not expensive at all, I got my return in 2 days (minus $20 in fees) instead of 10-14. I could have waited but a local furniture store was having a sale and I wanted to buy a couch! :P

  23. GenXCub says:

    My taxes were done by a reputable mom & pop place here in Vegas. Total cost: $115, extra deductions they found for me compared to Turbo tax estimates. 0. However, they made things REALLY easy. I just dumped off stuff and out it came. So, ultimately it cost $95 more, but I feel satisfied about this, and it will include a tax year planning session for how I can do better next year.

  24. forgottenpassword says:

    They are STILL doing this????

    I Thought they were busted for this a long time ago & got into serious trouble.

    BTw I hate their “I got people” ads (that they’ve shown last year & this year)….. yeah, you got people alright…. people that are willing to screw you.

    I do my own taxes. I’ve never liked H & R Block since they first came out with these anticipation loans.

  25. revmatty says:

    @char: I used turbotax when I moved mid-year. Easy as pie.

  26. revmatty says:

    @forgottenpassword: “I got people” that were working loading boxes at a warehouse last week and will be doing data entry at a construction company next week. Yea, their people are the hottest thing at JobCorp.

  27. Wormfather says:

    @chiieddy: Ya know I never realized that that $1,543 Home Depot gift card was the same amount that I was supposed to get refunded.


  28. qwickone says:

    @howie_in_az: you can refile it yourself. I dont know how long you have to do that though

  29. tande says:

    I’ve been trying to make this clear to friends, family, and co-workers for years.

    If they’re too complicated for pencil and paper or turbo tax get a real CPA, not some one who took a week long class and is effectively using the same software that turbo tax gives you. Too complicated for turbo tax would have to be really, really complicated BTW. In my circle of friends and family there is no reason that any of them should use any kind of preparer (unless it’s their parents). If it’s a W-2 (multiple states or not), some investment income, and a home loan you should be set. The tax code is complicated but IMO it has a lot more to do with the fear people have of doing their taxes. Fear that places like H&R feed on and even create (“audit protection” *pfft*).

    Perfect example, my brother and I were talking and he was going to go to H&R to get his taxes done. I told him to just send me the stuff and I’d do it for nothing, set it up direct deposit, and he’d have the money just as quick if not quicker. He said he’d rather have a professional do it. I tried explaining that I’ve got just as much “professional” experience as they do and with him having not a lot more then a W2 it would be cake. Then he pulled out one of their billboard slogans and said “but they can ‘maximize my deductions’ and I’m afraid you’d miss some”. I wasn’t going to convince him after that. I tried to tell him that he doesn’t spend enough on anything to be able to deduct it. The bus pass he was so concerned about getting the “maximum deduction” out of wouldn’t even come close to the standard deduction. In the end he paid over $100 for some one to take his income off a W-2 because he bought into a marketing campaign built around fear and ignorance. On top of that he “wanted an actual check”, which I came to realize after hanging up, meant he was going to fall for the RAL scam instead of waiting the 3 or 4 days it would of taken to get a direct deposit after e-filing.

  30. u1itn0w2day says:

    This is an example of why income taxes will NEVER go away.Too much money involved from accountants and firms like this.Even if congress voted to eliminate income taxes lobbyists from firms like this would make sure it would never happen.

    Even if you do these things by hand,do NOT go for what is essentially a loan,this is in the same league as these pay day loans.

  31. I love tax season. Me and my whole family gather up our tax documents and goto H&R Block. We have them spend a good hour or more with us. After they have finished the return, they try and close the deal. They offer me a cash advance loan. They let me know all I have to do is pay $80 now, then I get my refund of $1000, then in a few months I pay them $1400. Thats when I say “NO WAY, what was I THINKING?!?!?!” ….and I walk out.

    I knew I was going to walk out, before I walked in. It is my way of sticking it to the man.

  32. RandomHookup says:

    @tande: That’s harsh. I was going to make a joke about different fathers, but that would be cruel.

  33. Lakanar says:

    I work for H&R block as a customer service professional(receptionist) and really your treatment depends on the branch you’re dealing with. Mine has sold extremely few RALs this year and none of the tax pros push them at all.

    As for the tax pro quality, again, it varies. We have an EA(enrolled Agent) on staff as well 2 others who’ve been doing taxes for 20 years apeice.

    There are many people who would never come back to Block if their tax pros weren’t there.

    I frankly wouldn’t work here if I wasn’t for the great group of people I work with.

  34. Snarkysnake says:

    The people that are advising you to get a real CPA or tax specialist are speaking truth,my brother. Get someone that will do your taxes honestly and thouroughly and STICK WITH THEM.These chains are for lazy,unmotivated people.

  35. brennie says:

    @char: Don’t do it! Just file an extension and take your time doing some research and finding a good tax person in your new community. It will be worth it.

  36. nequam says:

    @qwickone: You get 3 years to amend your return.

  37. alice_bunnie says:

    Hate to tell you guys this, but the CPAs often go to H & R Block for their tax classes. And, your taxes often aren’t done by the CPAs themselves either. Sure, they’re glanced over by the CPAs eventually. I passed the CPA exam, took my CE classes at H & R Block, I use TurboTax and TaxCut now.

  38. NotATool says:

    @scottr0829: Some e-file providers don’t have any income limit for free e-File. Also some states (Illinois for one) offers free e-File on their state website.
    TaxAct FTW!

  39. silkyjumbo says:

    @alice_bunnie: my dad has been working the tax season at H&R for about 4 years now. he has to take quite a few classes every year in preparation.

    he also has a heart and doesn’t push the rapid refund thing. unfortunately, many people come in not understanding the loan deal and they demand a check.

  40. Sudonum says:

    I’ve been using Turbo Tax for 10 years, never been asked to put refunds on a gift card.

  41. AHammer says:

    What a creepy practice. I see people recomend turbo tax, I agree but they charge too much for the additional State tax filing.

  42. Parting says:

    @alice_bunnie: a CPA already got bases from his previous accounting experience. While regular H&R people, often have little education and understanding on what they are doing.

    I did H&R class, and what a waste of my time. After 2 classes, I couldn’t stand the stupidity of my fellow students (retired something, jobless, odd jobs, etc.) and just took the books and went through information by myself.

    I want at least reasonably intelligent person to do it, if I cannot use tax software.

  43. Major-General says:

    @SacraBos: My favorite was California deciding that my Oklahoma income was taxable in California, without an option for credit paid to another state.

  44. @silkyjumbo:
    Thanks for posting about your dad. I’m glad to see someone sticking up for some of the employees and their ethics. Your dad is probably the type of guy that just wants to help people prepare their taxes correctly and does’nt buy into this whole “holiday season” type mentality that seems to have crept into the national conscience. I mean, come on….LOANS so you can get your money RIGHT NOW? It’s peoples insatiable and foolish lust for cash that’s hurting the biz and HR block is just doing what the people want to stay with the times.

  45. friedfish says:

    My wife and I have never had a single problem with H&R Block. Sure they try to “sell” you as much as they can, it’s their job. It’s your duty to correctly decide if what they offer is good for you. Are auto companies bad if they try to sell you more options? Is a fast food place bad for asking if you want the “super jumbo” size… ok, bad example.

  46. stinerman says:


    The flatness of the tax has nothing to do with how long or short the form is. The mammoth amount of adjustments, deductions, and credits are what makes the forms so long.

  47. chiieddy says:

    @Sudonum: I was at least twice last year.

  48. jarchie219 says:

    Download Tax Act .
    Free. Easy if you don’t have an extra complex situation and don’t have computer-phobia.
    They do charge for state returns.

  49. Anonymous says:

    As an employee of Jackson Hewitt, I can say that I fully disclose that RAL’s are indeed LOANS, and therefore are subject to bank approval. In fact, I try to discourage RAL’s, but ultimately leave the decision up to the client, as some people truly do need the money in a day.

    The biggest misconception out there is that Jackson Hewitt is making money off of RAL’s. Simply not true. The BANK (in my area – Santa Barbara Bank & Trust) is making the money. The finance charges, account fees…all go to the bank. We provide RAL’s as a service to the client, yet we get no extra money. I advise all clients that if you can A)pay us up front (fees not withheld from refund), and B)wait a few weeks, go IRS direct. You’ll receive your entire refund, no bank charges at all.

    If, however, you decided to purchase a Gold Guarantee, or perhaps the new Health Discount Card, then yes, Jackson Hewitt does make an additional profit.

    As for doing it on your own, be our guest! We STRESS (at least in my offices) that if you have a simple tax return, do them online! Heck, we’ll even double-check them for free. But, if you have a shoebox full of receipts, a schedule C, sales of stocks…we recommend coming in.

    Sorry, but not every Jackson Hewitt is evil. We are like any other franchise – if you have a bad burger at McDonald’s, do you vow to never eat at McDonald’s again? NO! You go to another one. My suggestion…try another Jackson Hewitt. You may be pleasantly surprised.