Tax preparation is the act of preparing the filing of income tax returns. Because United States income tax laws are considered to be complicated, many people and corporations seek outside assistance with taxes.

Tax preparation may be done by the filer, with the help of a Certified Public Accountant, with the help of a tax preparation business, or with the help of tax preparation software and online services.
 

Controversy
The cost of preparing and filing all business and personal tax returns is estimated to be $250-$300 billion each year. According to a 2005 report from the U.S. Government Accountability Office, the efficiency cost of the tax system—the output that is lost over and above the tax itself—is between $240 billion and $600 billion every year. That means Americans spent for preparation roughly 20% of the amount collected in taxes.[1][2] In addition, tax preparation businesses have been plagued with controversies such as over Refund anticipation loans.

Refund anticipation loan
 

A (Tax) Refund Anticipation Loan (RAL) is a high interest rate short-term loan secured by a taxpayer’s expected tax refund.


United States
In the United States, the taxpayer commonly applies for the loan through a paid tax preparation firm. The tax preparation firm receives a fee for each loan originated, but in the United States the Internal Revenue Service rules prohibit basing this fee on the amount of the expected refund. Only the banks through which the loan is made are allowed to charge interest or finance charges.
 

According to the National Consumer Law Center, 12 million taxpayers used an RAL in 2004. With e-filing, tax refunds can be direct-deposited into the taxpayer's bank account within two weeks, rendering RALs less attractive to some.

 

Controversy
Despite their commonplace nature, RALs are controversial. Supporters of the practice say the loans allow people access to funds immediately in cases of an emergency such as overdue medical bills, credit payments, and other debts while they wait for the IRS to process their income tax return. Processing of a tax return can take anywhere from one week to a month and a half. Fees for these loans are in line with industry wide standards for non-secured loans.[citation needed] Supporters of RALs may also contend that many individuals are not entirely truthful when completing their taxes, and that banks take a great risk relying on the word of an individual that his or her tax refund will be received in the amount claimed.