H&R BLOCK, BANK REACH $39M SETTLEMENT: Tax prep giant H&R Block Inc. announced that a federal judge has approved a $39 million settlement of a class-action lawsuit brought by customers over the company's refund anticipation loans. The U.S. district court judge approved the settlement, the group's third effort to reach an agreement in the suit, which has dragged on since 1998. Block and co-defendant Beneficial National Bank - now owned by London-based HSBC - will split the payment.The lawsuit is one of several alleging that Block failed to disclose high costs and other features of RALs made to more than 17 million clients over a 13-year period.
In December 2005, Block announced a combined $62.5 million settlement for four similar class-action suits involving 8 million clients. Another set of claims, alleging federal racketeering violations, is scheduled for a hearing next month. Earlier this year, California Attorney General Bill Lockyer filed another lawsuit seeking damages for 1.5 million California residents with refund loans dating from 2001. Block has denied those allegations and is fighting the suit.
LARRY LEVITAN, FIRST IRS OVERSIGHT CHAIR, DIES AT 65: Larry R. Levitan, a longtime partner at Andersen Consulting and the inaugural chairman of the Internal Revenue Service's Oversight Board, died in late August at his home in Potomac, Md., after a battle with cancer. He was 65.
After his graduation from college, Levitan spent the ensuing 34 years with Andersen Consulting and consulted on telecommunications and utilities issues. In 2000, then-President Bill Clinton appointed him the first chairman of the IRS Oversight Board, where he remained a board member until 2005. He also served as a board member of Choice Hotels International and FBR Mutual Funds.
GAO SAYS IRS NEEDS TO COLLECT MORE DATA ON DONOR-ADVISED FUNDS: The Government Accountability Office is urging the Internal Revenue Service to require more comprehensive reporting of data relating to donor-advised funds, in an effort to address tax compliance challenges.
In its report, the GAO outlined a series of steps for the IRS in data collection regarding tax-exempt donor-advised funds, including suggesting that the service collect Form 990 data for, and provide guidance on calculating payout rates for, donor-advised funds and supporting organizations, as well as urging Congress to provide the IRS with the authority to protect taxpayer identification numbers from public disclosure. The GAO also recommended that the IRS require more thorough reporting of supporting organizations' ID numbers and report the TINs of recipients of large loans.
In contrast to private foundations, donor-advised funds and supporting organizations give donors less control over how donations will be used, but provide more favorable tax deductions, lower administration costs, less oversight from the IRS and fewer reporting requirements.
JUSTICE SEEKS TO BAR FORMER JACKSON HEWITT MANAGER: The U.S. Department of Justice has asked a federal court in Fresno, Calif., to bar the former manager of a Jackson Hewitt franchise from preparing federal income tax returns. The government alleges that during last year's filing season, David Meals, a former IRS employee, personally prepared, or supervised other Jackson Hewitt employees who prepared, more than 100 federal income tax returns falsely claiming tax exemption for casino-gaming proceeds paid to members of the Tachi Yokut Indian Tribe.
The complaint states that the returns improperly sought more than $826,000 in tax refunds. According to the suit, the Hanford, Calif., Jackson Hewitt office prepared 40 of the improper returns, and Meals falsely advised employees he supervised that Native American casino distributions are exempt from federal tax. Native Americans must pay federal income taxes on income they earn or receive, unless the express language of a statute or treaty exempts it from taxation.
The suit did not allege any wrongdoing by New Jersey-based franchiser Jackson Hewitt Tax Services Inc.
The case is the second injunctive action brought this year involving a Jackson Hewitt franchise in which the government has alleged that prepared federal income tax returns improperly claimed that casino distributions to Native Americans are not taxable.
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