IRS to stop releasing figures for refund loan

NEW YORK - The Internal Revenue Service said Thursday it will end its policy of releasing information about back taxes and other debts owed by taxpayers in the coming tax season.

The information, called debt indicators, has been included on acknowledgments the IRS sent to tax preparers when it received electronically filed returns.

The indicators served as a warning that some or all of a refund might be held back to cover old debt, including back taxes, unpaid child support, or delinquent federal student loans.

They are used by tax preparers to decide if a taxpayer can get a refund anticipation loan. The short-term loans have been criticized by consumer advocates for high interest rates and fees in exchange for access to money backed by refunds just a few days before the refund arrives.

After the announcement, H&R Block Inc., the biggest U.S. tax preparer, lowered its 2011 earnings forecast. The IRS' decision will cut profit 5 cents a share next year, company said.

"Restricting the debt indicator does not eliminate the need for refund anticipation loans," Alan Bennett, H&R Block's chief executive officer, said in a statement. "As a result of the IRS' decision, the nearly 8 million low to moderate-income consumers who select this product each year will likely be forced to seek higher-cost, and often unregulated, credit."

In 2007, nearly 9 million taxpayers paid more than $900 million in fees for such loans, according to the Consumer Federation of America and the National Consumer Law Center.

"We no longer see a need for the debt indicator in a world where we can process a tax return and deliver a refund in 10 days," IRS Commissioner Doug Shulman said.