H&R BLOCK TO PAY $62M TO SETTLE REFUND SUITS: Tax preparation giant H&R Block Inc. will pay $62.5 million to settle class-action lawsuits over its use of refund anticipation loans. Block said that the settlement would cover more than 8 million customers who received the loans between 1989 and 2005. The company has already set aside money for the potential settlement and announced that it plans to take a third-quarter charge of $31 million to cover the remainder of the settlement.The lawsuits said that RALs took advantage of financially unsophisticated taxpayers who were not adequately informed about high interest rates. Besides the cash settlement, Block agreed that it would better advise customers in the future about other options in filing taxes and gaining refunds quickly, as well as any interest charges or other fees they would have to pay. A federal judge in West Virginia was scheduled to review the settlement. If approved, the deal will resolve four class-action suits filed in West Virginia, Ohio, Alabama and Maryland, along with claims pending in 22 other states and Washington, D.C. Block still faces two other lawsuits tied to the loans.
CORPORATE TAXPAYERS NOT YET PREPARING TO E-FILE: Many large and midsized companies, which are required by the Internal Revenue Service to file their 2005 taxes electronically, have not begun preparing for the change, according to a recent poll conducted by Big Four firm KPMG.
More than a third (35 percent) of respondents from companies covered by the mandate said that they had not yet begun to prepare for e-filing. All companies with assets of $50 million or more and that file at least 250 returns annually must electronically file their 2005 taxes in 2006.
And although 30 percent of those surveyed are researching their options, followed by 18 percent who have started to evaluate alternatives, only 15 percent have a plan in place to satisfy the e-filing requirement. The remaining 2 percent of respondents had undergone the process already, filing their 2004 returns electronically.
"Although corporate taxpayers may think they have plenty of time to prepare for this change, they should understand that the preparation of this year's return may require several additional weeks of lead time to transition from traditional tax return preparation processes to the single electronic return transmission required," said Michael Dolan, director of IRS policies and dispute resolution in the Washington National Tax practice of KPMG, in statement.
The poll was based on an electronic survey of 205 corporate tax executives conducted on Nov. 18, 2005.
CBO SAYS TAX SYSTEM CAN'T MEET DEBT BURDENS: The Congressional Budget Office recently released its long-term budget outlook. The report doesn't offer specifics in terms of a solution to the country's increasing debt burdens, but does point out a number of reasons why the current system won't be able to solve itself.
Among the report's concerns are rising health care costs, which continue to grow faster than the economy. The report examines a range of possible paths for federal spending and revenues through 2050, and combines them into various hypothetical scenarios.
The report's executive summary says that analysis of the scenarios leads to a number of conclusions, chief among them that, driven by rising health care costs and an aging population, federal spending for Medicare, Medicaid and Social Security will claim a sharply increasing share of the nation's economic output over the coming decades. Even if taxation reached unprecedented levels, current spending policies would be financially unsustainable. Meanwhile, as the tax system is now configured, federal revenues will grow faster than the overall economy. If taxation is restricted to the levels that prevailed in the past, the growth of spending on programs for the elderly will have to be reduced substantially.
The report says that limiting the growth of outlays for defense, education, transportation and other discretionary programs would not be enough to ensure fiscal sustainability. Likewise, economic growth alone is unlikely to bring the nation's long-term fiscal position into balance. Moreover, issuing ever-larger amounts of debt or dramatically raising tax rates could significantly reduce economic growth.
The full report is available at the CBO's Web site, at www.cbo.gov.
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