With all the W-2s sent and tax season in high gear, advocates from the National Consumer Law Center and Consumer Federation of America warn of the risks and problems faced by taxpayers who use paid tax preparers. These include:
– Fraud, errors, and lack of fee transparency from unregulated paid tax preparers. The vast majority of paid tax preparers are not required to meet any minimum educational, competency, or training standards. Consumers are at risk from preparers who make errors or even commit fraud, exposing them to the possibility of audits by the Internal Revenue Service (IRS) or even criminal sanctions. Fees can be as high as $400 to $500, but preparers often refuse to provide firm price quotes ahead of time.
– Needless fees paid for financial products. Many paid preparers offer and promote financial products that can be unnecessary and expensive, such as refund anticipation checks (RACs). Consumer advocates also warn of a new generation of refund anticipation loans (RALs) on the market. These “no-fee” RALs are different from the ones that were driven from the market several years ago. However, some of these products could pose other perils, such as the possibility that paid preparers will increase their tax prep fee to include the cost of the RAL.
Free Alternatives for Older Taxpayers
Two free alternatives for low-income taxpayers are Volunteer Income Tax Assistance (VITA) sites (1-800-906-9887 or at www.irs.gov) and AARP Tax-Aide sites: (www.aarp.org/findtaxhelp). Choosing a VITA or AARP Tax-Aide site saves eligible taxpayers the cost of a tax preparation fee. Many VITA sites can also help taxpayers open a bank account or get a low-cost prepaid card, which enables taxpayers to get fast refunds without paying a fee. The IRS Free File program (www.irs.gov) includes websites that allow some low- and middle-income taxpayers to prepare and file their taxes online for free.
Source: National Legal Resource Center