While one might assume that it requires a modicum of tax expertise and perhaps some sort of certification to be a paid tax preparer, the sad fact is that most states have little to no standards for selling tax preparation services, meaning that once again millions of Americans are being put at risk when seeking help with their tax returns.
With today being the official kickoff of Tax Season (did you buy your decorations?), the National Consumer Law Center and the Consumer Federation of America are warning American taxpayers that you could be putting your financial future in the hands of someone who knows even less about tax preparation than you do — and that you could end up paying the price if they screw up or try to play fast and loose with the law.
“Tens of millions of consumers will use paid tax preparers to fill out their most important financial document of the year,” says NCLC staff attorney Chi Chi Wu, “yet most of these preparers are not subject to any minimum educational, training, or competency standards.”
A 2013 study by the NCLC found that 47 states have stricter regulations for barbers than they did for paid tax preparers.
The Government Accountability Office recently completed an undercover study that sent investigators into the offices of 19 paid preparers. of those, only two (2!) prepared returns with the correct refund amount, with the others erring anywhere from $52 below what the refund should have been to $3,718 more than the correct refund.
Preparers in two cases showed the undercover investigators that they could get more of a refund if they didn’t report secondary income, and then prepared the returns without that income even though they were aware of it. One preparer wrongly stated that cash tips not reported on a W-2 didn’t need to be included on the return.
In 2011, the IRS attempted to regulate the tax-prep industry by requiring that all non-CPA tax-preparers register and demonstrate, through testing and mandatory education programs, their understanding of tax-related issues.
But that effort to weed out inept preparers been hung up in court ever since. In Feb. 2014, a federal appeals court upheld a lower court ruling that the IRS didn’t have the statutory authority to enact such regulations, even if they were a good idea.
In addition to inept preparers whose mistakes could end up costing you even more when the IRS notices, or could even result in an audit, there are several questionable and unethical practices that consumers run into when dealing with the underbelly of tax preparation.
• Difficult to compare fees
Ask a paid preparer for an estimate on what it will cost you and they may flat-out refuse to give you a figure. They may also give you a vague estimate that they aren’t locked into and which could be very different from the actual costs.
According to the GAO, tax-prep costs, even within the same tax-prep chain, will vary wildly from preparer to preparer, making it difficult to have any idea what one should be paying for services. Undercover investigators paid anywhere from $160 to nearly $600 for tax-prep services.
Costs can also vary not only based on what time of Tax Season the return is filed, but on what time of day you have the return prepared.
“Tax preparation is one of the few businesses in this country where consumers can’t get an accurate price quote before buying the service,” stated David Rothstein, director of Resource Development & Public Affairs at NHS of Greater Cleveland in a statement. “The lack of transparency and disclosure is stunning. How can there be a competitive market if consumers can’t comparison shop due to lack of price information?”
If your preparer isn’t willing to give you a precise preparation cost before they begin, you should really question why.
• Needless fees
Many tax preparers, especially those who serve underbanked consumers, will offer financial products like refund anticipation checks, which get you your estimated refund now but at a price, with the issuing bank taking anywhere from $25-60. Beyond that, some of these preparers will then tack on their own fees — in addition to the cost of the tax preparation — further depleting your refund.
The IRS’s VITA program provides free tax-prep assistance for people earning $53,000 or less, and the agency’s Tax Counseling for the Elderly (TCE) program assists those 60 years of age or older. Click here for information on how to find a VITA or TCE site near you.
The AARP also offers its free Tax Aide program to low/moderate-income individuals, with a focus on those 60 years of age and older.
by Chris Morran via Consumerist
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