Mo Money case exposes loophole in law

Customers of Mo Money Taxes still don't have their tax refunds, and a loophole in the law is the problem.

Turns out that it may have something to do with how they filed their taxes.

At this point, many Mo Money customers have given up hope they will ever see a check from the tax preparer. And, if they filed direct deposit, the government can't get their money back.

Whether they knew it or not, customers of Mo Money Taxes agreed to have their tax refunds deposited into Mo Money bank accounts. Mo Money was supposed to take its cut out of their checks and give back what was left.

But hundreds got nothing at all. Michael Robinson of Norfolk took his concerns to the Internal Revenue Service.

"She asked me [if I received] a check or anything, and I was like, 'not one brown penny,'" Robinson said.

At a House subcommittee hearing Thursday in Washington D.C. , Robinson testified in front of IRS officials. Some were surprised to hear Mo Money refunds went through a chain of banks and processors.

"It's not clear who is watching these kinds of financial institutions," Nina Olson, a national taxpayer advocate who works for the IRS said. "That's what I was interested in, the description of that scheme was falling into some of those cracks."

Another crack became apparent. The IRS can't help direct deposit victims get their money back.

"Under the law, if someone steals your paper check and forges your signature on the back and cashes it, the government has a way to reimburse you and Congress has created a fund to reimburse you," Olson said. "But the way the law is written, it only talks about paper checks. It hasn't gotten into the 20 ^th century, much less the 21 ^st century."

The Mo Money story exposed that loophole. Congressmen at the hearing said changes must be made immediately to protect victims like Robinson.

"I was encouraged," Robinson said. "I think something is going to actually happen and get done."

Many Mo Money customers qualified to have their taxes done for free, but didn't know it. Congressmen at the hearing say the IRS needs to do a better job publicizing its assistance programs .