Tax Refunds

California's attorney general has settled a lawsuit against H&R Block Inc. over a widely used loan program that gives the nation's largest tax preparer a chunk of customers' tax refunds. Atty. Gen. Jerry Brown said Friday that the $4.85-million settlement would stop H&R Block from offering high-cost loans it had marketed as early tax refunds. Former Atty. Gen. Bill Lockyer sued H&R Block in 2006, adding California to a long list of others that sued over its "refund anticipation loans."

If the money comes, they will spend it. Most taxpayers in Southern California would be eligible for tax rebates under the economic stimulus plan drafted in Washington on Thursday. Many, it seems, would cash their checks and head to the mall. "I'm not just going to go out and blow it, but it's unexpected, and that's a pretty good amount of money," said Adam Finer, a 36-year-old lighting technician from Burbank.

The Internal Revenue Service is going after about 5 million retirees and disabled people. But don't worry -- the tax agency is only trying to help. Really. The people in the targeted group may be entitled to economic stimulus payments of $300 or more but haven't yet claimed them, said IRS Commissioner Doug Shulman. If they want a check this year, they have to file a simplified tax form by Oct. 15. The IRS is mailing information packets encouraging these individuals to file.

Only a few weeks into the tax-filing season, the Internal Revenue Service says consumer returns are already riddled with errors as the result of a new and tricky telephone-tax refund. It is a one-time tax credit that aims to refund a 3% federal levy that consumers have paid on their phone bills for years. The tax was rescinded last summer, and the IRS is giving back the amounts consumers paid over the last three years.

IRS criminal investigators this week conducted raids in Riverside and six other cities to shut down tax preparation businesses suspected of abusing a one-time telephone tax refund. The Internal Revenue Service said Friday that some tax-return preparers were requesting thousands of dollars of refunds for clients despite IRS pronouncements that the tax break should be in the $30 to $60 range.

Most American taxpayers are likely to get an extra $30 to $60 in their refund checks this year, thanks to a one-time credit available to anyone who made long-distance phone calls. But nine people whose returns were filed electronically from a Riverside halfway house for drug and alcohol abusers last month sought phone-tax refunds totaling $439,632 -- an average of $48,848 each, according to the Internal Revenue Service. Fat chance, tax investigators said.

Tribune Co. said Monday that it had received a refund of about $344 million in income taxes and interest paid under a 2005 U.S. Tax Court ruling in a case it settled with the government. A tentative settlement was reached last spring during an appeal of the 2005 decision, which had disallowed the tax-free reorganization of Matthew Bender & Co., a former subsidiary of Times Mirror Co.

Tax refunds will be delayed for millions of middle-income taxpayers next year because of late action by Congress to limit the widening reach of the so-called alternative minimum tax, the Internal Revenue Service said Thursday. Until lawmakers passed a one-year "patch" last week, the alternative tax, once aimed at wealthy filers, had threatened to ensnare about 23 million Americans for the first time -- including about half of the taxpayers earning $75,000 to $100,000 a year.

The government improperly identifies hundreds of thousands of taxpayers every year as potential cheats, forcing them to endure needless delays of up to three years to receive the refunds they deserve, according to the Internal Revenue Service's taxpayer advocate. And the IRS does not make a practice of contacting taxpayers under investigation and allowing unwitting suspects the chance to prove that their returns were accurate -- or to show that errors were honest mistakes rather than fraud.

An Indian employee of an information technology consulting company filed a lawsuit Tuesday alleging that he and other foreign workers were required to hand over their tax refunds to their employers. Starting when he came to the United States from India in 2000, Gopi Vedachalam was ordered to sign over federal and state tax refunds totaling about $25,000 to his employer, Tata America International Corp., according to the suit filed in San Francisco federal court.