WHERE IT STARTED
FIRST SEEN: Late 1980s (RAL product); fraud cases from the 1990s · GOING FOR: About 35 years
Refund anticipation loans were introduced by US preparers and banks in the late 1980s; the first fraud prosecutions involving inflated refunds and skimmed loan proceeds date from the 1990s.
Refund anticipation loans (RALs) were sold by US tax preparers and partner banks from the late 1980s: a short-term loan against the expected federal refund, paid the same day at very high effective interest. Fraud rode on top: preparers inflated deductions to create big refunds and skimmed fees from the loan proceeds, and identity-theft rings filed false returns and cashed the RAL or 'refund anticipation check' before the IRS caught up. Regulators pushed banks out of RALs in 2010-2012, but refund-transfer products and 'refund advance' loans continue and the scheme persists with stolen identities and diverted refunds.
HOW IT WORKS
A preparer files a return with fabricated deductions, credits or dependants so the refund is large, sells the client a refund anticipation loan or cheque, and takes fees and sometimes part of the refund from the proceeds; the client is later liable when the IRS audits. In identity-theft versions the ring files hundreds of returns in stolen or deceased people's names, collects Treasury refund cheques and RAL cheques through a complicit check casher, and vanishes before the IRS matches records. Some preparers simply divert clients' refunds to debit cards they control.
A preparer who promises a bigger refund than others and charges a percentage of itFees deducted from the refund rather than paid up frontRefunds routed to a card or account the taxpayer does not controlReturns claiming credits or dependants the taxpayer never mentionedA check-cashing business handling stacks of Treasury refund cheques
HOW USEFUL IT IS TO CRIMINALS
A preparer controls both the return and the loan paperwork, so inflating a refund and taking fees needs no accomplice; identity-theft rings can file hundreds of returns before the IRS matches wage data. The IRS does not publish a fraud rate for refund-loan products, and cases are typically prosecuted years after the filing season, so most losses are never recovered.
THE DAMAGE IT HAS CAUSED
$606,781
Largest cited single RAL/refund-cheque cashing case (Haigler); no total published — US DOJ Tax Division
No body publishes a total for refund anticipation fraud; the IRS reports stolen-identity refund fraud broadly. Documented cases run from $40,000 to over $600,000 per preparer, with the Haigler check-cashing ring moving 263 cheques worth $606,781. Clients are left owing repayment and penalties on refunds they never fully received.
263 Fraudulent Treasury and RAL cheques cashed in the Haigler case (US DOJ)
$600,000+ RAL fees taken by accountant Jiten Mehta from inflated refunds (US DOJ)
8.7 million Refund anticipation loans sold in the 2007 filing season before banks were pushed out, per GAO (GAO-08-800R, 2008)
WHO USES IT MOST
MOST OF ALL: 🇺🇸 United States ▸
Refund anticipation loans and checks are a US tax-industry product, and all documented prosecutions are by the IRS and Department of Justice.
United States (RAL products, IRS prosecutions)Puerto Rico (identity-based refund schemes)Canada (refund-scheme preparers)United Kingdom (HMRC repayment agent complaints)Nigeria (stolen-identity refund filers)
GOVERNMENTS LINKED TO IT
No government is documented as using this method.
NOTABLE PEOPLE WHO USED IT — RANKED BY PROFILE ORDER (NOT BY AMOUNT)
#1 Jiten D. Mehta CONVICTED (4 YEARS)REPORT PENDING
Over $600,000 in RAL fees · 2000s
Ohio accountant convicted of 16 counts of preparing false returns and nine of wire fraud after inflating deductions and taking over $600,000 in fees from clients' refund anticipation loans through BankOne's RAL programme.
SOURCE: US DOJ press release
#2 David Haigler CONVICTED (37 MONTHS)REPORT PENDING
$606,781 · 2011-2012
Alabama check casher who cashed 263 fraudulent Treasury refund and refund anticipation loan cheques for a stolen-identity ring.
SOURCE: US DOJ Tax Division press release
#3 Mo' Money Taxes (Memphis chain) CONVICTED (PREPARERS 2016; PARTNERS SENTENCED NOV 2019)REPORT PENDING
Not published · 2011-2016
Tax-preparation chain whose partners and preparers were convicted of conspiring to file false returns and skim refund-linked products across several states.
SOURCE: Forbes, 9 Jun 2016; FOX13 Memphis, 30 Nov 2019
#4 Valentina Martinez CONVICTED (HOME CONFINEMENT, MAR 2025)REPORT PENDING
Over $40,000; $41,823 restitution · 2020s
Massachusetts preparer who added fake business deductions and diverted the inflated refunds to debit cards she controlled.
SOURCE: IRS Criminal Investigation, 7 Mar 2025
SOURCES
US DOJ, 'Check Casher Sentenced to Jail for Involvement in Fraudulent Tax Refund Scheme'
US DOJ, Jiten D. Mehta sentencing (preparation of false returns and wire fraud)
IRS Criminal Investigation, 'Former tax preparer sentenced for theft of tax refunds', 7 Mar 2025
Forbes, 'Mo Money Tax Preparers Are Sentenced To Prison', 9 Jun 2016
FOX13 Memphis, 'Mo Money Taxes partners sentenced in conspiracy case', 30 Nov 2019
GAO, 'Refund Anticipation Loans', GAO-08-800R, 2008
IRS Fact Sheet FS-06-16, 'Tax Return Preparer Fraud'