Don't Fall for Tax Preparation Gimmicks

                                                         

According to FranchiseHelp Holdings there are approximately 38,287 tax preparations companies in the U.S. Approximately 144 million taxpayers filed tax returns last year. For several decades large chain tax preparation companies have preyed on low-income neighborhoods, inner-city and rural areas opening offices across the country. These taxpayers were lured into their offices promising to receive quick refunds in exchange for a fee knowing that most of these taxpayers were desperate for money and would jump at the opportunity even though it was a bad choice.

Offices are specifically located in areas where incomes are less than $50,000 or in areas where there are several check cashing stores and liquor stores. These tax preparation companies also lure these taxpayers into their offices with free coffee, snacks, and flat screen televisions in the waiting areas all to get repeat business and increase their profits.

In some instances customers are lied to and confused by the services offered and don’t realize that if they file their taxes online or through a free tax preparation center they can get their refund back in the same time period. These large chain companies are stealing money from low-income taxpayers who need their money the most.

The federal government stopped these large chain tax preparation companies from offering the refund anticipation loan or rapid refund. However, these tax preparation chains found a loophole around. H&R Block now offers taxpayers the gimmick to put your refund on an “Emerald Card” for a $45 fee or to you can get a “paystub loan” where taxpayers get a partial advance on their tax refund in December of January before the taxpayer receives their W-2. The interest charged on this paystub advance is 25% in addition to the fee charged to prepare their taxes.

H&R Block also has a “Second Look” gimmick where they offer to look over your taxes to find errors. When you file taxes the IRS will catch the errors and fix them for you so there is no need to waste time going to H&R Block or any other company.  Jackson Hewitt and Liberty Tax offer similar gimmicks. Jackson Hewitt allows taxpayers to go to Walmart to get their taxes prepared.  You have the following options:

• Get a Walmart prepaid debit card which requires you to load money onto the card for a fee.
• Receive a $10 Bluebird American Express gift card or get your tax refund for free if you get direct deposit
• Get at $20 Walmart gift card if you file your taxes online.
• Get a $50 Walmart gift card if you file your taxes in a Walmart store.

These are all gimmicks to get you in the Walmart store to shop. These companies charge higher prices, are inexperienced, make mistakes, use gimmicks, may not be honest, add a protection clause or an arbitration clause in their contracts which prevents taxpayers from suing them in court.

The alternatives to filing with the tax preparation chains are:

1.      File your taxes using a tax preparation software.

2.      File your taxes by mail.

3.      Hire an accountant or CPA.

4.      If you earn less than $60,000 go to a free tax preparation center by calling 800-906-9887 or using the site http://irs.treasury.gov/freetaxprep/ or use free tax preparation software which can be found on www.irs.gov.

5.      Use IRS Free File if your adjusted gross income is $60,000 or less.

6.      If your income is above $60,000 you can use Free File Fillable Forms available on the IRS website www.irs.gov.

7. Use an authorized tax efile provider which can be found on www.irs.gov.
8. Comparison Shop. Go to at least 3 companies to get price quotes to help you find the best deal.
9. Price match. Ask about price match guarantees that honor competitor prices.
10. Go with your gut. Use common sense. Go with your gut instinct, if you feel like the deal is too good to be true or if you feel like something is not right with the loan, don't sign it.
11. Ask questions. Ask lots of questions; have everything explained to you prior or during settlement.
12. If you still decide to use a tax preparation company and don’t want to pay their fee, you don't have to pay. You can take your paperwork, leave and look for another company to prepare your taxes.

Be wary of people or companies that brag about getting you large refunds, provide guarantees, or offer to get your refund quicker without ever seeing your taxes or knowing anything about you. When looking to hire a tax professional things to consider are:  qualifications, licensed in your state, experience, past references, work hours, professional reputation, trustworthiness, professionalism, professional memberships, your specific tax needs, comfortability and capability.