By Tobias Salinger
City Limits, reporting from Citylimits.org
When Danny Taylor tried to pick up the free tablet advertised to customers at a Bushwick Instant Refund Tax Center last week, the manager turned him away.
"I would kick his [butt] if I wasn't with my daughter," said Taylor about the manager.
Though the exchange between Taylor and the manager, who declined to be interviewed, did not lead to an altercation, advocates say consumers should take note of experiences like Taylor's.
Government officials and consumer groups worry that low-income Americans forfeit too much of their refunds to fees and schemes. With tax day approaching, experts are warning consumers to be on guard against tax preparers who drain refunds by promising gifts or pushing loans.
"We continue to be concerned about bait-and-switch tactics where there's an offer of getting quick cash that may not exist," said Feltner, adding that the best advice is to seek out free tax preparation.
Old Concerns, New Products
Feltner contributed to a joint annual report with the National Consumer Law Center about tax season financial products. He said a "crackdown" by federal bank regulators against the financing of a quick cash loan known as a "refund anticipation loan" has relegated the product to the periphery of the markets. But that led to the rise of the refund anticipation check, which allows customers to delay paying their tax-prep bill until they get their refund but does not arrive sooner than a standard refund.
And it may not always be clear what customers are signing up for. Secret shopper tests cited by the report showed that refund anticipation checks are sometimes sold "automatically" to consumers without their knowledge.
"This is not a loan," said Hellen Mejia, office manager at an H&R Block on Myrtle Avenue in Bushwick, when asked about refund anticipation checks. "It's just a product that they take if they don't want to deduct fees up front."
But advocates say the fees, which start at $24.95 for at H&R Block, are the problem. More than 18 million taxpayers paid almost $700 million for refund anticipation checks in 2011, according to the report. Low-income recipients of the earned income tax credit paid $2.2 billion for anticipation loans and checks that year.
And when all fees for loans and checks were included, H&R Block's average price for filing taxes came to $183. Voicemail and email requests for comment to the H&R Block corporate media office were not returned.
Charges for tax preparation deduct significant funds in Brooklyn, where state records show nearly 285,000 earned income filers claimed an average of $660 in 2009.
"The tax refund, particularly for low-income consumers who receive the earned income credit, is the largest lump sum they'll receive throughout the year," Feltner said in a phone interview.
The Internal Revenue Service offers free tax prep services. People over 60 years old and individuals with incomes under $51,000 both qualify for free tax preparation, an agency brochure notes. Interested consumers can find local tax help through the Volunteer Income Tax Assistance and Tax Counseling for the Elderly programs by logging onto irs.gov or by calling (800) 906-9887.
"There's no reason to pay a fee to get your tax refund earlier," said Feltner, who added that the certified tax prep volunteers must complete "rigorous" training.
Consumers who would like paid professional help can inquire into the credentials of their preparers. A federal program to begin mandatory competency tests and tax classes for tax preparers is currently under challenge in court by the libertarian Institute for Justice.
"It's a wild, wild west when it comes to tax preparation," said Michael Dennery, the owner of the Williamsburg Tax Service on Broadway Avenue. Dennery owns one of the six tax prep storefronts on the ten blocks between the Myrtle and Flushing Avenue JMZ stations.
On Dennery's office wall hung a large copy of the city's "Consumer Bill of Rights Regarding Tax Preparers," a listing of Dennery's academic degrees and a prominent price board.
Just down the block, the wall of the Instant Refund Tax Service displayed signs reading, "You want it FAST, Come & Get It" and "You don't need your W-2 form." Placards handed out in the office and at subway stations promise clients a free tablet while supplies last.
A phone number listed on the placard leads to a recorded greeting but no "refund specialist" or other person on the line. And managers at two stores declined to supply contact information for corporate headquarters.
Tax preparers are obligated to provide copies of the Consumer Bill of Rights, according to the city Department of Consumer Affairs. And the New York Better Business Bureau advises filers to check with the bureau about a preparer before agreeing to their services.
Andy Carter, president of the National Association of Registered Tax Return Professionals, noted preparers should posses a preparer tax identification number and charm.
"I would go back to that issue of trust," said Carter. "Do you have that feeling of trust when you walk through the door?"
Such questions can help filers avoid practices like the alleged fraud at Instant Tax Service, a different tax prep business from Instant Refund Tax Service. A criminal complaint against Instant Tax Service franchisees in Indianapolis alleges they trained employees to falsify W-2's and income claims. There are criminal cases against Instant Tax Service franchisees in at least five other states, and a federal court in Ohio will begin a trial in May to decide whether to grant the government's request to shut down the firm. The company's website lists seven Instant Tax locations in New York City.
"To the extent that we've discovered inappropriate conduct, we've taken action, including notifying the IRS," said Thomas P. Whelley II, a lawyer representing Instant Tax Service, in a phone interview.
Feltner of the consumer federation said people looking for tax prep help should understand their options.
"It's important to keep in mind that costs vary," he said. "Consumers should shop around."
Despite the sign advertising speedy refund anticipation loans outside JC Travel, Brokerage and Accounting Agency off Myrtle Avenue, no information was available inside about the product.
"I don't understand," said Juan Cruz, whose business card lists him as president of the company, when asked about the loan. "Do you want to file taxes?" He declined to be interviewed for the story.