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An Open Letter to the Senate Committee on Finance: Denying Access to Debt Indicators Will Hurt Taxpayers

May 16, 2007

Dear Senator:

On behalf of the nearly 362,000 members of the National Taxpayers Union, I urge you to oppose any effort to terminate the IRS's debt indicator program. This service provides notification about outstanding government debts that may affect a filer's expected refund amount. In particular, the indicator will highlight the existence of debts (such as delinquent federal and state taxes) that would be garnished from a tax refund before the IRS remits the remaining amount to the filer. For this reason, the debt indicator can act as an important "heads up" to taxpayers who might otherwise be devastated later on when their expected refund turns out to be much smaller.

When used in conjunction with an application for a refund anticipation loan (RAL), this data helps consumers receive loans that are closer to their actual refund amount and protects lenders from issuing loans that are less likely to be paid back in full. We believe that denying access to debt indicators could force an increase in fees for everyone as lenders service more uncertain loans. The federal government shouldn't be artificially inflating the cost of a convenient and voluntary financial product that millions of taxpayers decide to utilize every year, especially when market competition has recently exerted downward pressure on refund anticipation loan fees. RALs exist because some consumers find themselves in situations where it is important to have quicker access to refund money than the IRS can provide. Instead of calling for another regulatory crackdown, Senators who are concerned about this issue of access to refunds should instead seek reforms in the tax agency's historically flawed computer and information-technology projects.

Currently, section 7529 of S. 1219 contains language that would cut off access to debt indicator information. We strongly urge Senators to remove this section from the bill during committee mark up.


Kristina Rasmussen
Senior Government Affairs Manager