It’s tax rip-off season

From research by the National Consumer Law Center, a private, non-profit advocacy group in Boston:

  • About 60 percent of taxpayers hire someone to do their income taxes. But tax preparers often make mistakes or give bad advice.
  • Anyone can open a tax-prep service. No special knowledge is required, and only three states require licenses (California, Maryland, and Oregon). H&R Block and Jackson Hewitt do require their employees to undergo training. At other shops, employees sometimes don’t even know what to do with supplementary tax forms.
  • Tax preparers often pad the bill with “junk fees” like an “application fee” or “document preparation fee.” You shouldn’t have to pay these.
  • The biggest rip-off of all is the “refund anticipation loan.” Customers often get the idea that this is free money that will be paid off by the amount of their refund. Truth is, the tax-prep shop charges interest on the loan, at rates comparable to the steep charges for payday loans and similar rip-offs. If you accept the loan, you’ll have to fork over up to 25 percent of your refund.

Source: “Is that tax preparer really qualified?” Consumer Reports, March 2009, pp. 12-13.

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