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.”
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.