The Treasury Inspector General for Tax Administration (TIGTA) has publicly released its review of the impact that Refund Anticipation Loans (RALs) have on taxpayers.

The report, titled Many Taxpayers Who Obtain Refund Anticipation Loans Could Benefit From Free Tax Preparation Services, was based on a survey of 250 taxpayers whose Internal Revenue Service (IRS) records indicated they had received a RAL. The survey was designed to gain an understanding of why taxpayers obtain a RAL, the cost of the loan, and their experiences during the process.

A RAL is a loan designed to give taxpayers their income tax refund more quickly for a fee. The taxpayer's refund is then paid directly to the loan originator as payment on the loan. The IRS is not involved in this contract between the taxpayer and a lender, cannot grant or deny the RAL, and cannot answer any questions about it. RALs are repaid directly to the lender, typically within 5 to 14 days. For Tax Years 2005–2007, the number of RALs has remained at about 10 million.

"TIGTA found that most taxpayers would be willing to wait up to nine days to receive their tax refund instead of paying for a loan," said J. Russell George, Inspector General, Treasury Inspector General for Tax Administration. "In many instances, the IRS can process the refund that quickly."

TIGTA also found that a majority of survey respondents would have qualified for the IRS's free tax preparation assistance at Taxpayer Assistance Centers, Volunteer Income Tax Assistance sites, and Tax Counseling for the Elderly sites, or use the Free-File Program to file their tax returns for free.

"Most survey respondents indicated they were unaware of the free tax preparation assistance available to them through the IRS," continued George. "While some eligibility requirements must be met in order to participate in these service offerings, the survey findings indicate that the IRS should be taking a more aggressive approach to educate the taxpaying public about the options available to them in fulfilling their filing obligation."

TIGTA recommended improving its marketing of available free services to taxpayers who apply for RALs. TIGTA made a similar recommendation in a June 2007 audit Additional Action Is Needed to Expand the Use and Improve the Administration of the Free File Program. The IRS agreed with TIGTA's recommendations in both reports.