Friday, January 8, 2010


I was going to include Trish McIntire’s post “Filing With a Pay Stub” over at OUR TAXING TIMES in my final BUZZ for 2009 – but, as it is an important issue, I decided to devote an entire post on the subject.

Trish tells us –

This is the time of the year where the radio and TV ads and business signs suggest that you can bring in your last pay stub and get money. Implied is that the return is being done and you are receiving all or part of your refund. Buyer Beware! Please check into what you are buying.”

Basically what the advertiser is attempting to do is sell you a form of usurious high fee Refund Anticipation Loan (RAL) also known as a “pay-stub loan”. And, as Trish points out, there may be additional restrictions – “It may have to taken in a debit card or applied to a car/furniture purchase”.

What is not being done is filing a proper tax return. As a tax preparer for 38 years I can tell you without a doubt that it is literally impossible to prepare a correct and accurate income tax return from just the final pay-stub of the year.

Trish goes into more detail -

By the middle of January, I will have received a half a dozen calls wanting to file from their pay stub (I've already received one). Can't do it. IRS requires me to have a copy of every W-2 on any return I file. (There is an exception to that but it can't be used until the middle of February.) If you can find someone who says they will file from a paystub, don't assume you are okay since they are the ones breaking the law. You will have to sign the e-file authorization which says you are filing a correct return. If you are filing from a paystub, you may not have an accurate return. W-2s and paystubs seldom match or there may be other income you are ignoring or forgotten about. Also, if the preparer is ignoring the rules and filing with a paystub, what other rules are they ignoring and could those have a consequence for you? Is getting your refund a few days/weeks early worth the potential problems and costs?

A Refund Anticipation Loan is a bad financial product – and a pay-stub loan is even worse!