Comparative Analysis of Electronic Filing and Predatory Lending

The key task of this mixed method research was to evaluate the role of the Internal Revenue Service (IRS) in relation to the predatory market created by Refund Anticipation Loans (RALs). The problem that this research addressed is that electronic filing and the existence of RALs has created a predatory lending market that is disproportionately inequitable to low income taxpayers. The purpose of this mixed method research is to conduct a comparative analysis of how the electronic filing program and taxpayers in order to ascertain which implemented procedures or taxpayer rationale lead to the creation of a predatory lending market. The IRS introduced electronic filing in 1986 with the purpose of cutting down the agency's cost of processing returns. Based on a Woodstock Institute's report, it was established that low income taxpayers are about 3.6 times more probable to subscribe to RALs. It was also revealed that low income tax filers spent 3.3% of their reimbursement on costs from RALs, draining wealth from low income households. The researcher also evaluated Electronic Filing of taxes, which enable professional tax preparers and taxpayers a chance to submit their tax returns to the IRS through a computer. In this regard, a preparer of income tax return is any individual who prepares for refund, or who hires one or more individual to prepare for reimbursement, any tax return. It was established that an individual might be a return preparer, irrespective of educational credentials and professional status requisites. It was also established that the IRS did assist RAL banks in creating a predatory lending market. The researcher recommends that the IRS continue to promote RALs while regulating the program through their tax professional participants. Future studies should be conducted to determine the impact of identity theft for the purpose of stealing someone's tax refund against the IRS ability to further develop their electronic filing program.