Know Your Rights, Avoid Refund Loans
With the 2012 tax filing season in full swing, Attorney General Eric T. Schneiderman issued tips to protect New Yorkers from tax preparation scams.
The attorney general also asked taxpayers to notify his office of any suspected fraudulent schemes designed to steal personal and financial information from consumers.
As taxpayers begin to receive W- 2 forms, Schneiderman noted, IRS impersonation schemes tend to flourish. For example, scammers prey on seniors or college students by impersonating tax authorities, solicit follow up information on a tax form, and collect identification numbers and social security information, which is then used to steal people’s money or identities.
Some scammers have even gone to the extreme of using “spoofing technology” to make their caller ID numbers come up to look like they are from the IRS. The attorney general’s regional offices throughout the state have received multiple complaints from consumers about tax preparation schemes like these.
In addition to these scams, it was noted, there are tax preparation businesses that take advantage of consumers through a variety of other deceptive practices. One common tactic is to advertise low fees to get the customer in the door, only to increase the final fee by hundreds of dollars, claiming the tax return was more complicated.
There are also offers of “instant cash” to help a consumer pay bills while waiting for their refund, but they can come with undisclosed fees and high interest rates. In addition, some business are just not equipped to handle the volume of business they take in, resulting in delays in getting the refund that one paid a premium to get “fast.”
“Preying on the desperation of people in a tough economy is unconscionable,” said Attorney General Schneiderman. “Tax season is stressful enough as it is-the last thing New Yorkers need to worry about is having their identities stolen by unscrupulous scammers. While there are plenty of legitimate and law-abiding tax preparers doing business, there are some who use the allure of fast cash to take advantage of unsuspecting consumers. When hiring tax preparation services, consumers must have as much information as possible to protect themselves from fraud, and should file a complaint if they feel they’ve been victimized.”
As taxpayers look for help in filing their taxes, Schneiderman issued the following tips for consumers:
– Use recognizable and established companies.
– Check the tax preparer’s qualifications.
– Check the tax preparer’s history through the Better Business Bureau.
– Check for disciplinary actions and verify licenses.
– Find out about disclosed and undisclosed service fees.
– Avoid those who base their fees on a percentage of a refund.
– Make sure the tax preparer is accessible, even after the April due date.
– Never sign a blank return.
– Review entire return before signing.
– Make sure the preparer signs the tax form and includes a Preparer Tax Identification Number (PTIN).
– Check out free informational services from the local government and online.
– Avoid “too good to be true” promises.
– Consult New York’s “Consumer Bill of Rights Regarding Tax Preparers.”
Consumers should also beware of refund anticipation loans (RALs) and refund anticipation checks (RACs). RALs are often marketed as “instant” or “24-hour” refunds but are actually high cost loans than come with fees and interest that reduce the amount of any refund, Schneiderman noted.
New York law, General Business Law section 372 (known as the Consumer Bill of Rights regarding Tax Preparers), requires RALs to be marketed as loans not refunds. RACs are temporary bank accounts established on behalf of a taxpayer into which a direct deposit refund can be received but these also come with fees that will reduce a consumer’s refund.
The preparer must give the consumer a written disclosure that explains:
– the taxpayer is not required to take out a refund anticipation loan or refund anticipation check in order to receive their tax refund;
– the amount of fees and interest a taxpayer will have to pay if they take out a refund anticipation loan or refund anticipation check;
– the amount a taxpayer will receive after the fees and interest are deducted;
– the annual percentage rate of interest that a taxpayer will be charged; and
– the amount of the refund will be if a taxpayer doesn’t take out a refund anticipation loan.
Consumers can avoid the costs of refund anticipation loans and checks by filing their return electronically and having refunds directly deposited into their own bank account.
The law does not apply to attorneys, CPAs (certified public accountants) and certain others who prepare tax returns. However, even those preparers must comply with the requirements regarding refund anticipation loans.
The attorney general also reminded New Yorkers that there are Volunteer Income Tax Assistance (VITA) sites where consumers can get their tax returns prepared free of charge. For more information about how to qualify and identify a VITA location site, go to: www.irs.gov/individuals/ article/0,,id=107626,00.ht ml.
Consumers whose income is $57,000 or less may qualify for FreeFile and can use free tax preparation and free e-filing software. Information on free e-filing is available at: www.tax.ny.gov/pit/efile/ freefile.htm.
Schneiderman is urging New Yorkers to be vigilant consumers and to report instances of fraud to his office. Consumers who feel they’ve been victims of any tax preparation scams are urged to contact the Attorney General’s office at: 1-800-771-7755.