CONSUMER ALERT: DEPT of CONSUMER AFFAIRS AND NEW YORK CITY TAXPAYER ADVOCATE WARN NEW YORKERS ABOUT TAX REFUND DELAYS AND PAID PREPARERS WHO PROMISE “EXPRESS” OR “ANTICIPATION” REFUNDS
City Encourages New Yorkers Earning $64,000 or Less to File for Free with NYC Free Tax Prep
The Department of Consumer Affairs (DCA) Commissioner Lorelei Salas and New York City Taxpayer Advocate Eunkyong Choi today issued a warning to New Yorkers about predatory tax preparer tactics, in particular advertis- ing for and selling “express refund advances” or “refund transfers.” The announce- ment was made at the Lower East Side People’s Federal Credit Union, which is one of the City’s NYC Free Tax Prep sites and also an NYC Financial Empowerment Center that provides free, one-on-one financial counseling.
Due to a new federal law, the PATH Act, the Internal Rev- enue Service (IRS) is now re- quired to hold refunds until February 15, 2017 for filers who claim the Earned Income Tax Credit (EITC) or the Ad- ditional Children Tax Credit (ACTC). Most refunds will then be issued in approxi- mately 21 days, which is al- most three times as long as previous years. This is partic- ularly troubling as those that claim EITC and ACTC are often low- to moderate-in- come working individuals and couples. A 2016 report by the Urban Institute concluded that this is the first time that delaying refunds for a spe- cific group of filers has been used in an attempt to prevent errors and fraud. As a result, the delay will affect those who often rely on their an- nual refund to help make ends meet. There is consen- sus among researchers that this community of taxpayers is a significant consumer base for paid preparers and the delay could result an uptick in the use of refund products that force consumers to pay hundreds of dollars in unfore- seen fees or interest.
“We are already seeing paid preparers who seem to be capitalizing on the delay in refunds by heavily promoting their refund advance products,” said DCA Commissioner Lorelei Salas. “New Yorkers need to be extremely wary of any promises to get their refund sooner—the IRS won’t accept returns until January 23 and can’t issue refunds until legally allowed. If you are promised otherwise, you may be getting less of the refund you deserve. If you earned $64,000 or less, don’t pay at all—file for free with NYC Free Tax Prep and get every penny of your refund as soon as possible under the new law.”
“With 2017 tax season offi- cially underway, many tax preparers will lure New York- ers with the promise of an immediate refund, only to be stuck with high fees and disappointment,” said Council Speaker Melissa Mark-Viverito. “New Yorkers should be aware of these unscrupulous methods and tax preparers should clearly state what’s entailed when offering these quick refunds. I want to thank the Department of Consumer Affairs for bringing to light these predatory tactics as people begin to look to file their taxes.”
“The delay in issuing refunds this year will cause financial hardships for many low-in- come taxpayers who often need to access their refunds to pay overdue bills and other debts,” said Eunkyong Choi, New York City’s Taxpayer Advocate. “Therefore, it is very important for taxpayers to file their returns as soon as possible. We are also advising New Yorkers to beware of tax preparers promoting no-fee Rapid Anticipated Loan and Refund Anticipation Check programs, as there are usually large and often hidden fees associated with them.”
“As tax season approaches, all New Yorkers should check to see if they’re eligible for free City-sponsored tax preparation services, and keep their guard up against ‘early refund’ deals that could cost them in the long-run,” said Manhattan Borough President Gale A. Brewer. “The Earned Income Tax Credit in particular can pro- vide an incredible boost to low-income New Yorkers at tax time, but that’s under- mined whenever a refund delay pushes more people toward the tax-season version of predatory payday lending. I thank the Department of Consumer Affairs for its on- going work to safeguard and assist city taxpayers, and urge the Internal Revenue Service to avoid any unnecessary delays in disbursing New Yorkers’ refunds.”
“I urge my constituents, and all New Yorkers, to take every precaution to ensure that they are not being cheated out of the refunds or tax credits they deserve,” said Congresswoman Carolyn B. Maloney. “We should all be wary of using paid tax pre- parer services and early re- fund products. We are lucky to live in a city that provides its residents options to help save money during tax time, and I join DCA in encourag- ing New Yorkers making $64,000 or less per year to make use of the services pro- vided by the City.”
“With tax season upon us, it is crucial that New Yorkers are aware of their rights and have access to vital informa- tion about all available re- sources to avoid scams and help them through the complex tax process,” said Coun- cil Member Rafael Espinal, Chair of the City Council Committee on Consumer Affairs. “This will help working and middle-class New Yorkers, who depend on their tax returns to make major purchases, debt payments, or put food on the table in this ever-expensive city. I thank the Department of Consumer Affairs and Commissioner Salas for their efforts to raise awareness and provide free tax preparation services to New Yorkers.”
“Unfortunately, fraud is prevalent and never ending,” said Council Member Rosie Mendez. “Now, taxpayers utilizing EITC and ACTC are at risk. New Yorkers earning less than $64,000 who will file for these tax credits should come to the Lower East Side People’s Federal Credit Union or another ap- proved NYC Free Tax Prep site to get help. Not only can you get your taxes done for free, you will also be assured not to be a victim of fraud.” “As the tax season ap- proaches, it’s important that New Yorkers have the infor- mation, support, and financial education to make sure they’re making the best fi- nancial decisions possible, in- cluding with tax refunds,” said State Senator Daniel Squadron. “I thank the De- partment of Consumer Af- fairs, the Lower East Side People’s Federal Credit Union, and my colleagues in government for helping spread the word on bad actors trying to make a quick buck.”
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 pre- pared, 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 re- lated 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.
The NYC Department of Consumer Affairs (DCA) protects and enhances the daily eco- nomic lives of New Yorkers to create thriving communities. DCA licenses more than 81,000 businesses in more than 50 industries and en- forces key consumer protec- tion, licensing, and workplace laws that apply to countless more. By support- ing businesses through equi- table enforcement and access to resources and, by helping to resolve complaints, DCA protects the marketplace from predatory practices and strives to create a culture of compliance. Through its community outreach and the work of its offices of Financial Em- powerment and Labor Policy & Standards, DCA empowers consumers and working families by providing the tools and resources they need to be educated consumers and to achieve financial health and work-life balance. DCA also conducts research and advo- cates for public policy that furthers its work to support New York City’s communities. For more information about DCA and its work, call 311 or visit DCA at nyc.gov/dca or on its social media sites, Twitter, Facebook, Instagram and YouTube.