Sen. Charles Schumer, D-N.Y., at a Finance Committee confirmation hearing for President Bush's choice to head the Internal Revenue Service, said he was worried that people eager to get their rebate checks early will turn to so-called refund anticipation loans, or RALs - short-term loans that often come with high interest rates.

Schumer said a taxpayer expected to get a check of $1,600 in May -- the earliest that the rebates might be ready if Congress passes a stimulus package quickly -- might settle for a $1,400 check in March, with the difference going to the lender. That would be an 87 percent annualized interest rate, he said.

The IRS, Schumer told Douglas Shulman, the nominee to be commissioner of the tax agency, must move quickly to provide the rebates so others don't "steal this money out of the pockets of American families."

Shulman, currently vice chairman of the Financial Industry Regulatory Authority, said it was "unfortunate that taxpayers have to avail themselves of loans." He said the agency needs to take steps, such as modernizing its computer system so there is a shorter time between filings and the distribution of refunds, so people don't resort to high-interest loans.

The IRS has no authority to ban refund anticipation loans, but has warned consumers to avoid preparers offering high-interest loans, often to low-income people, in anticipation of refunds. Earlier this month it said it was considering new rules to discourage tax preparers from selling products such as the anticipation loans.

Finance Committee Chairman Max Baucus, D-Mont., also laid out a list of problems that Shulman will face if, as expected, the Senate confirms him as the next IRS commissioner. Those included the gap between taxes owed and taxes collected, a computer system that Baucus said was still in the Dark Ages, an aging work force, increasingly complex financial products and the need to reform the Byzantine tax system.

He urged Shulman to work toward a 90 percent tax payment compliance goal by 2017. Currently the compliance rate is about 83 percent, he said, a factor behind the tax gap, which is estimated at around $290 billion a year.

Shulman acknowledged that the tax gap, with some people getting away with not paying their fair share, had the potential to undermine the system. He said one key to narrowing the gap was more third-party reporting, where employers provide the IRS with information on employees.

The top Republican on the committee, Charles Grassley of Iowa, and Sen. Ken Salazar, D-Colo., pressed Shulman on the issue of tax abuses by charitable organizations. That "gets into sensitive issues," Shulman said. "The IRS has to be seen as fair, consistent and impartial."