Department of Consumer Affairs Warns About Predatory Tax Preparer Tactics

Department of Consumer Affairs (DCA) First Deputy Commissioner Alba Pico today, as part of National Consumer Protection Week, issued a warning to New Yorkers about predatory tax preparer tactics, including overcharging, hidden fees and filing without permission. As part of the City’s annual tax preparer inspections, DCA conducted more than 350 targeted inspections citywide and issued violations to two in every five income tax preparers inspected. Top violations included failing to post prices for their services, misrepresenting their qualifications and violating other consumer rights. First Deputy Commissioner Alba Pico also encouraged New Yorkers who earned $62,000 or less to take advantage of the City’s free tax preparation services. DCA made the announcement at a press conference with the Better Business Bureau Serving Metropolitan New York, the New York State Office of the Attorney General and the U.S. Postal Inspection Service.

“Every New Yorker should know their rights before going to a paid preparer to file their taxes,” said Department of Consumer Affairs First Deputy Commissioner Alba Pico. “For a number of years, refund anticipation loans disappeared thanks to federal regulations but they are back in a new way this year. The products are supposed to be free of interest and the cost isn’t supposed to be passed on to the consumer but, as we all know, things are rarely “free.” With the most common violation at tax preparers being related to the price list, we want consumers to be very vigilant about what they are being charged to file their taxes. If you earned $62,000 or less, we encourage you to take advantage of the City’s NYC Free Tax Prep program and get back the full refund you deserve.”

“National Consumer Protection Week is about raising financial awareness, especially as we enter the height of tax season. There are too many predatory tax preparing services across the City taking advantage of hardworking people, and we need to make sure everyone knows their rights. I want to thank DCA for all they are doing, and I urge all New Yorkers to use the City’s free tax services,” said NYC Public Advocate Letitia James.

“With the tax filing season in full swing, I am happy to partner with DCA during National Consumer Protection Week to remind people to be vigilant when using the services of paid tax preparers. Unfortunately, most unscrupulous tax preparers target immigrants or low-income individuals. These New Yorkers, however, don’t realize that if they have earned less $62,000 in income the previous year, they can file their taxes for free through theCity’s NYC Free Tax Prep program. This program has well qualified tax preparers that will help taxpayers file their taxes the right way and will not take advantage of them while doing so,” stated Council Rafael L. Espinal, Jr., the Chair of the City Council’s Consumer Affairs Committee.

Every year, DCA inspects income tax preparers who were issued violations the previous tax season, as well as those located in neighborhoods with large populations of immigrants. This year, DCA focused its efforts on bad actors including those with previous violations and those who received consumer complaints. DCA has received more than 90 complaints about tax preparers in just over two months, with overcharging as the top complaint. During inspections, DCA found that many tax preparers do not post their fees as required by law, or do not provide consumers with an itemized receipt or statement of charges, making it easier to overcharge consumers.

In New York City, tax preparers must post their tax preparation services and fees, provide consumers with an itemized receipt or statement listing the individual cost of each service and form prepared, as well as a receipt with the address and phone number where the tax preparer may be contacted throughout the year. Consumers have the right to receive a written estimate of the total cost for all charges related to each service offered by the tax preparer. It is illegal for tax preparers to charge a fee based on the amount of tax owed or refund due, guarantee a specific refund amount, or have a filer’s tax refund mailed to the tax preparer, unless the filer has signed an authorization. Consumers should ask the preparer for a Consumer’s Bill of Rights Regarding Tax Preparers and read it thoroughly before having their taxes prepared with that preparer. Tax preparers who offer refund anticipation loans or advances must disclose to the consumer that the product is a loan. These loans are often marketed as “instant,” “rapid,” or “advance” refunds and should not carry a fee or interest. 

DCA also encourages New Yorkers who earned $62,000 or less to take advantage of the City’s free tax preparation services. This year, tax preparation services include more than 200 Volunteer Income Tax Assistance (VITA) and AARP Tax-Aide sites citywide, as well as online self-preparation at nyc.gov/taxprep. At the sites, returns can be prepared in-person by an IRS certified VITA/TCE volunteer preparer or dropped off to be completed by the preparer. At the convenient drop-off sites, filers can leave their tax documents and return later to pick up the completed return or receive it by email. New Yorkers can call 311 or visit nyc.gov/taxprep and use DCA’s interactive map to search for the most convenient free tax site.

Consumer Tips Regarding Tax Preparers

·         Make sure your tax preparer is registered. Every tax preparer in New York State must be registered with the New York State Department of Taxation and Finance. Call 311 to see if the business you’re using has received any complaints.

·         Know Your Rights. Tax preparers must post their qualifications, fees, and whether or not they will represent you at a government audit. Preparers must sign every tax return, and provide customers with a copy of your tax returns and an itemized receipt or statement for your service. 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 (available in español (Spanish), عربي (Arabic), Kreyòl Ayisyen (Haitian-Creole), 한국어 (Korean) andРусский (Russian)) before any discussions with a consumer.

·         Ask for an estimate and compare your itemized receipt or statement to the posted prices. Consumers have the right to ask for an estimate before having their taxes prepared. Tax preparers may not charge you fees based on the amount of taxes you owe or your anticipated refund.

·         Avoid Refund “Advances” or “Checks.” Some preparers advertise “refund advances” that are “free” and deducted from your refund but be sure to check the fine print and look for any fees. Ask for the price with and without the advance and compare prices of other preparers to make sure the price isn’t higher because of the advance. 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.

·         Read the fine print about prepaid and gift cards. Some preparers offer to put some or all of your refund on a prepaid or gift card, be sure to check how much you will be charged for this option. Also, know the fees associated with using, not using (dormancy) or reloading the card, if it has an expiration date and what happens if the card is lost.

·         File for free! If you earned $62,000 or less, you can file your taxes for free. Visit nyc.gov/taxprep or call 311 for more information.

·         File a complaint with DCA. Call 311 or visit nyc.gov/consumers to file a complaint about a tax preparer.

The Department of Consumer Affairs (DCA) licenses, inspects, and educates businesses, assists and informs consumers, mediates complaints, and offers free financial counseling and safe banking products. DCA enforces the Consumer Protection Law, the Paid Sick Leave Law and other related business laws throughout New York City and licenses nearly 80,000 businesses in 55 different industries. For more information, call 311 or visit DCA online at nyc.gov/consumers or on its social media sites, Twitter, Facebook, Instagram and YouTube.