New York State Attorney General Eric Schneiderman issued advice Tuesday to taxpayers on hiring tax preparers, saying it is needed to avoid “deceptive and fraudulent practices this tax season.”
Eric Schneiderman
In addition, Schneiderman’s office asked New York taxpayers to notify his office of any suspected fraudulent schemes designed to steal personal and financial information from consumers. The IRS and the Justice Department have been stepping up their efforts this year to curb the growing problem of identity theft-related tax fraud (see IRS Conducts Nationwide Sweep to Crack Down on Identity Theft and Tax Refund Fraud).
“Taking advantage of innocent people in this tough economy is shameful, and will not be tolerated by my office,” Schneiderman said in a statement. “New Yorkers who are trying to obey the law by filing their taxes on time should not have to worry about being ripped off by tax scammers covertly charging them excessive fees or peddling other cons. Tax season is stressful enough. That’s why my office is helping provide New Yorkers the information they need to make sure they don’t get ripped off by scam artists.”
Each year, Schneiderman’s offices throughout the state receive complaints from consumers about tax preparation schemes. Some scammers prey on seniors or college students by impersonating tax authorities, soliciting follow up information on a tax form, and collecting identification numbers and Social Security information, which is then used to steal people’s money or identities. Others 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.
Schneiderman warned that taxpayers should be alert to tax preparation businesses that advertise low fees to get the customer in the door, but then increase the final fee by hundreds of dollars claiming the tax return was more complicated than anticipated, or to a tax preparer who electronically withdraws more than the agreed upon fee without notice to the consumer.
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 (www.bbb.org);
• Ask for a written estimate of all fees;
• Avoid those who base their fees on a percentage of your 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, or PTIN;
• 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 and refund anticipation checks, Schneiderman’s office cautioned. RALs are often marketed as "instant" or "24-hour" refunds but are actually high cost loans that come with fees and interest that reduce the amount of any refund. New York State’s General Business Law section 372 (known as the Consumer Bill of Rights regarding Tax Preparers), requires RALs to be marketed as loans, not refunds (see Sweep Nets Hundreds of NYC Tax Preparers Violating Laws). 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 the consumer’s refund. The tax preparer must give the consumer a written disclosure that explains:
• You are not required to take out a refund anticipation loan or refund anticipation check in order to receive your tax refund
• The amount of fees and interest you will have to pay if you take out a refund anticipation loan or refund anticipation check
• The amount you will receive after the fees and interest are deducted
• The annual percentage rate of interest that you will be charged
• The amount your refund will be if you don’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 either mailed or directly deposited into their own bank account.
The Attorney General is also reminding New Yorkers that there are Volunteer Income Tax Assistance, or 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.html.
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 report any instances of fraud to his office if they feel they have been victims of any tax preparation scams. They can file complaints by visiting the Attorney General office’s Web site or calling 1-(800) 771-7755.
12 Comments
I'm appalled that all of the sudden Tax Preparers are akin to the most vile in this nation. That someone that works at a name company knows more than a small tax business, when generally its the other way around. H&R Block told my clients 89 year old mother that she didn't have to file because she is 89. She has 17K in income, not including SS. I worked one season at H&R and all I did was fill in boxes.
Of course there is fraud with TP's, EA's and CPA's, heck we hear it all the time, but to single out TP's especially is down right offensive. I've been doing taxes for 30 years. I did a simple -I mean simple 1040A with efile - she had 2 w-2's & a 1099-SSA, she went to H&R last year it cost her 89 -this year with me it cost her $39.
Its so frustrating.
Posted by: katzzmeow | March 21, 2013 10:06 PM
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New York State Attorney General Eric Schneiderman is a fool. I have reviewed only 2 tax returns recently that were prepared by others. The first was a big tax firm doing thousands of returns. This 1065 had such glaring errors that I was SHOCKED. Either the preparer knew nothing or just did not care. Putting 50% of the mortgage payment as a rent expense for their home office, etc etc etc. The second one was one of the wonderful FREE services offered. The preparer told a tax payer that they COULD NOT utilize taxes paid to NYS (they had sold a rental property the previous year)as a deduction and would be better off taking the standard deduction. That advise cost the taxpayer over $3,000. And the best advise that New York State Attorney General Eric Schneiderman can give is to use these services and not mine. Because I am small. I am an enrolled agent and spend as much time on every return as I need to ensure that everything is accurate and prepared correctly.
Posted by: markgny | March 21, 2013 9:13 AM
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You will note nadezdamindyuk that the free file is only for Federal. If you have a state return you are out of luck. If I have a client come in who "only" needs the state return done, I charge them for a full return because I have to enter all the information anyway. so much for saving money.
Also, if you had carefully read the other posts they talk about how the people did themselves out of their legal tax breaks. Just because your income is under $57,000 doesn't mean you have a simple return. Plenty of people with income that low own their own homes and have rentals or self employment income. What you don't know can hurt you. When you file because you have cheated yourself or when you get audited because you have, however innocently, cheated the government.
Posted by: ShortStuff | March 20, 2013 6:58 PM
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It never surprises me how the people that know the least about something always talk the loudest and make the most noise. The first thing that I take exception to is the States Attorney suggesting that they go to established recognizable companies. They are the ones who rip clients off the most. The big well advertised companies have the relationships with banks that charge those outrageous fees, not the single practitioners. They double or triple the cost to prepare a tax return and the banks and host agency get that money not the preparer. Has he even looked at some of the lawsuits brought against those big recognizable companies by other States Attorneys or States Attorney Generals. They are always getting sanctioned. Just because they are big and advertise a lot does not mean they are better. As for software I had a client that came to me for an amendment, when I looked her return over I noticed that the software took her itemized deduction even when it was much lower that the standard deduction!! How basic can you get. Not to mention that a preparer who can use the gray area of tax law, that is not black and white, the so called loop holes that software won't even inquire about. The software will miss and so will the preparers of those recognizable firms who work at a discount store when they are not doing taxes. Then to top it off there are only 2 requirements to owning a tax franchise, one is the money the other is a pulse. They don't require any tax expertise to run one of those. If they are not trained how can they tell if there employee's are doing it right. I agree with the comments that say there are good and bad preparers like in any other profession. Bigger does not always mean better.
Posted by: vinoone | March 20, 2013 4:34 PM
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I had a client who used TurboTax . He did not understand on his 1099R what 'taxable undetermined' ment. So he did not include it.
He thought he could fight the IRS - he lost.
Posted by: Cameosunshine | March 20, 2013 12:42 PM
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I got sick and tired of politician just as such or Mayor of a city who are incompetant of doing what they are suppose to do, and have all the time in the word to spend in accusing tax preparers of doing the above. I am in business for 12 years and to be honest with you, what do you mean by signing a blank return? read the coment by davehere which I really like. Is the problem the fee, or fraud by using the clients personal info? get a life guys, in every practice there is good and bad, politicians should not generalize all tax preparers as it seems to be, we do provide a good service, and we do deliver..vs these policians who dont...
Posted by: hjubran | March 20, 2013 12:38 PM
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I have had numerous clients this year who had filed previously using online tax software and had failed to take advantage of credits due them. One, single mom teacher had me check last years and this years returns she had done with tax software, and we found she had not taken the American Opportunity Tax Credit for either year. We filed an amended return for 2011 and this year's return and she was ecstatic at the increase in her refund!
Another client came in with three years of returns she had done using boxed software, but she had never filed the returns because she was unsure about them. To me, it is just well worth having a qualified professional do something as important as your tax return.
Posted by: gmadden | March 20, 2013 11:53 AM
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Did anyone notice that 2 years ago all of the online Turbo Tax was breached and million of individuals information was stolen !!!!!
There is no such thing as FREE !! Turbo Tax is selling your personal infomation.
Posted by: JDAVIS | March 20, 2013 11:49 AM
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My office always explained that the client can go online and file for free, since anyone who wanted a bank product had to be given that info. However, if they wanted to go online and do it themselves they would not be at my office. Most people today know that they can do their own for free but we are required to tell them of this option. It's akin to Neiman Marcus being required to tell their customers they can get the product cheaper at Wal-mart. I have never had a client who claimed not to know that they could do it themselves for free. However, we DO have people calling us who are online trying to do it for free and they want us to walk them through the process, also for free. Give people credit for knowing what they want to do. I know there are some fraudulent preparers out there, just as there is in any business, but most of us try our best to do a good job, even though the IRS wants us to do their job for them. I don't think we should be required to tell the client they can go elsewhere and get it done free. They should do their own advertising and not use those who have worked hard to establish a legitimate business to drum up business for Free-file.
Posted by: anitamartinez | March 20, 2013 11:43 AM
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VITA offices only have a 50% accuracy rating, according to the IRS's own data. Free-file software is only as good as the taxpayer's own knowledge of the law. Lots of software out there which can catch a math error but can not catch any mistakes based on a misunderstanding of tax law. Basically, you get what you pay for when it comes to tax preparation.
Posted by: olivertax | March 20, 2013 11:10 AM
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very well played, coming from a deceptive politician.
Posted by: davehere | March 20, 2013 8:14 AM
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Today, it depends directly from dishonesty policy of online companies: they sell data of their customers to gain money, they don't think that it is a sources of tax fraud. Moreover, as accountant, I know some companies which provide consulting/statistics services have enough resources to create schemes to tax avoidance and tax evasion in the framework of reason-consequence relationship of their business actions. The author of the article is right that the e-file is more acceptable. Thank you for information that "Consumers whose income is $57,000 or less may qualify for FreeFile and can use free tax preparation and free e-filing software." I'd paid for this service.
Posted by: nadezdamindyuk | March 20, 2013 7:48 AM
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