DN Editorial: Want to avoid tax-preparing exploiters? Get taxes done for free
THERE is never a shortage of people trying to get rich off the poor: predatory lenders, mortgage scam artists, rent-to-own companies and other business models designed to exploit people desperate for cash.
THERE is never a shortage of people trying to get rich off the poor: predatory lenders, mortgage scam artists, rent-to-own companies and other business models designed to exploit people desperate for cash.
This time of year, the leading contenders for this vile practice are tax preparation services that take advantage of low- and middle-income taxpayers, charging high and unnecessary fees, employing underqualified workers who, as some watchdogs report, often resort to fraud.
And April is their Christmas.
Too many companies try to grab a piece of the billions of dollars flowing to taxpayers in refunds and in earned-income tax credits. They do this not by charging for quality professional services, but by charging fees as high as $400 to $500 for a simple return, additional fees to expedite access to refund money or other tricks designed to get as big a percentage as possible of people's money.
Often, a tax refund or tax-credit check represents the biggest boost to consumers' bank accounts - or, as the National Consumer Law Center puts it, "A tax refund is one of the most critical financial events for many consumers during the year."
In Philadelphia, for example, the average earned-income tax credit check is $1,925. Even a dime of that wealth going into other people's pockets can maintain a vicious cycle of struggle.
Some progress has been made in the shadier sector of tax preparation. For example, refund-anticipation loans were, until recently, a form of predatory lending. Tax prep companies would charge extremely high interest rates to give someone a refund in days, rather than the few weeks it takes for the IRS to issue refunds. While a general crackdown on this practice made such loans virtually extinct, it just opened the door to other questionable practices to rise in their place. Refund-anticipation checks, for example, allow access to refunds but at fees that can be as damaging as a predatory loan.
Yesterday, the Senate Finance Committee held a hearing on how to better protect consumers against incompetent and unethical tax-return preparers. It's clear that some of that protection rests on better standards for tax preparers. As the Consumer Law Center points out, hairdressers are more regulated than tax preparers. Last year, the IRS attempted to establish better standards, but that attempt was shot down by the courts. It's now up to Congress.
Meanwhile, in Philadelphia, there's a simple solution: the free tax services offered by Campaign for Working Families.
Each year, the CWF trains volunteers and opens free tax sites around the city - there are 18 this year - to make sure that taxpayers get everything that is coming to them. This year, they anticipate doing 15,000 returns.
The returns are done by volunteers, all of whom are certified by the IRS. No fees, no scams to watch out for. Just all the money that's due taxpayers. And those who haven't filed for past years should visit a site; even if you don't owe taxes, not filing can jeopardize your access to the earned-income tax credit.
Check out cwfphilly.org or call 215-851-1886 for a site.