Department of Consumer Affairs (DCA) Commissioner Jonathan Mintz today announced the results of a two-week long enforcement sweep of income tax preparers throughout the City. DCA conducted close to 850 inspections Citywide and issued violations to one in three income tax preparers for violations of consumer protection laws. The Department issued more than 1,000 violations to tax preparers who misrepresented their qualifications, violated consumer rights, or illegally advertised refund anticipation loans (RALs) as “instant” or “rapid” refunds. Total fines from the enforcement sweep could reach close to $1 million. Commissioner Mintz also encouraged New Yorkers to take advantage of the many options available for filing their taxes for free or very low cost.
“There are substantial tax refund dollars waiting for New Yorkers, who have, since 2002, claimed almost $20 billion in Earned Income Tax Credits alone,” said Commissioner Jonathan Mintz. “That’s why we’re making it as easy as possible for people to file their taxes and claim those refunds. And since the IRS issues these refunds in such a short amount of time, there’s no reason for such expensive, often deceptively sold loans getting in between you and every dollar of your refund.”
DCA inspected income tax preparers charged with violations in 2011 and 2010, as well as other preparers located in neighborhoods with large populations of immigrants and high usage of refund anticipation loans. DCA found that 65 percent of businesses that received a violation last year and were inspected this year, were complying with the law. In New York City, tax preparers must post their qualifications, fees and charges, and whether or not they will represent consumers at a government audit. Preparers must sign every tax return, and provide their customers with a copy of their tax return and a receipt for their services.
Refund anticipation loans (RALs) are predatory, high-interest loans often marketed as “instant,” “rapid,” or “24-hour” refunds. However, they are actually expensive, high interest-bearing loans that consumers must pay back even if their refund is not as large as they had anticipated – a fact that is often not disclosed by income tax preparers. RALs are not illegal in New York City, but income tax preparers must disclose that these products are loans with annualized interest rates as high as 500 percent, significantly decreasing an expected refund.
New Yorkers Making $57,000 or Less Have Access to Free or Very Low Cost Tax Preparation
- Volunteer Income Tax Assistance Sites: Have Someone Do Your Tax Return for Free. New Yorkers with children who earn less than $50,000 or $18,000 for those who do not have children can visit one of 69 Volunteer Income Tax Assistance (VITA) sites in the five boroughs where a certified volunteer will prepare their taxes for free. New Yorkers visiting select Volunteer Income Tax Assistance (VITA) sites have the opportunity to participate in the SaveUSA program. If selected, participants could receive a 50 percent match, up to $500, if they deposit at least $200 of their tax refund into a SaveUSA account and maintain the initial deposit for one year.
- Online Tax Preparation: Do Your Taxes Yourself for Free at Home. New Yorkers earning less than $57,000 can also file their taxes online for free at nyc.gov/taxprep. The City is partnering with Intuit Inc. and One Economy Corporation to offer this online free tax preparation. Depending on your online selection, you will be routed to TurboTax® Freedom Edition or Beehive’s online tax tool powered by H&R Block.
- H&R Block Discount: Have Professional Preparers Do Your Tax Returns for Only $29. New Yorkers can also have their tax returns prepared at a participating H&R Block office with a new City-sponsored coupon for just $29. To qualify for the H&R Block discount, residents must earn less than $41,000 with children or $31,000 if they have no children. Those interested should visit the City’s website nyc.gov/taxprep to print out the coupon. New Yorkers who qualify for H&R Block discount tax preparation in 2011 will receive the same $29 offer next year if they are eligible.
DCA enforces the Consumer Protection Law and other related business laws throughout New York City. Empowering consumers and businesses to ensure a fair and vibrant marketplace, DCA licenses more than 78,000 businesses in 55 different industries. Through targeted outreach, partnerships with community and trade organizations, and informational materials, DCA educates consumers and businesses alike about their rights and responsibilities. DCA’s Office of Financial Empowerment (OFE) is the first local government initiative in the nation with a mission to educate, empower, and protect New Yorkers with low incomes so they can build assets and make the most of their financial resources. Toward that end, OFE seeks to increase access to high-quality, low-cost financial education and counseling; improve access to income-boosting tax credits; connect households to safe and affordable banking and asset-building products and services; and enforce and improve consumer protections to enhance financial stability. For more information, call 311 or visit DCA online at nyc.gov/consumers.
- Avoid “Instant,” “Rapid,” “Express” or “Fast Cash” refunds. “Instant” refunds are actually loans with extremely high interest rates known as refund anticipation loans (RALs). RALs must be repaid even if you don’t get your refund or it is smaller than you expected. If you have a bank account and file your taxes electronically, you can arrange for direct deposit of your refund in as little eight days. Ask your tax preparer about this option.
- Know Your Rights When Dealing with Tax Preparers. Tax preparers must post their qualifications, fees and charges, and whether or not they will represent you at a government audit. Preparers must sign every tax return, and provide you with a copy of your tax return and a receipt for your services.
- Protect Yourself. Tax preparers may not charge you fees based on the amount of taxes you owe or your anticipated refund. Never sign a tax return that is blank, incomplete, or filled out in pencil. It could be changed later. Tax preparers are required by law to give each customer a free, current, and legible copy of the Consumer Bill of Rights Regarding Tax Preparers before any discussions with a consumer.
- Don’t pay cash. Never mail cash when paying your taxes. Pay by check or money order only.
- File a tax preparation complaint with DCA online at nyc.gov/consumers or by calling 311.
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