Refund Anticipation Loans and the Tax Gap

  • January 2009
  • 20 Stan.L.& Pol'y Rev. 85
  • Article

This Article argues that our general lack of understanding how return preparers contribute to the decision to comply or not comply with our nation’s tax laws limits the ability of policymakers to take effective administrative or legislative action to reduce the tax gap associated with returns related to refund anticipation loans (RALs). The Article also situates efforts to reduce the tax gap attributable to low-income taxpayers within the broader context of efforts to reduce the tax gap overall and discusses the arguments that advocates have made in response to the IRS’s request for information regarding the effect of RALS on the tax gap. It analyzes the incentives for paid preparers to inflate refunds and discusses how the IRS should turn its immense fact gathering and research capabilities to the issues of practitioners and how practitioners can influence compliance decisions.