| Releases & Statements
Contact: Frank Sobrino,
Press Secretary
O: 212.669.4193; C: 646.250.4322
For Immediate Release: March 16, 2006
Public Advocate Betsy Gotbaum today
cautioned New Yorkers to steer clear of unscrupulous commercial
tax preparers offering costly “instant refunds” and
called on the chief executives of two of the country’s leading
commercial tax preparation firms to end their “financial
abuse” of low- and moderate-income families.
“We’ve all seen the commercials
and store-front signs,” Gotbaum said. “H&R Block,
Jackson Hewitt and others offering an ‘instant refund.’
They tell you that you can walk out of their office with your
refund in hand. What they are really offering is an expensive,
high-interest loan that can cost you a significant portion of
your refund.”
The loans, known as Refund Anticipation
Loans (RAL), can cost hundreds of dollars in fees and carry exorbitant
interest rates of as much as 700 percent.
“That’s steep by any standard,”
Gotbaum said. “But it’s especially hard on New York’s
many working families, duped each tax season by the ads, sales
pitches and fine print.”
Indeed, a survey last year by the
National Consumer Law Center and Consumer Federation of America
found that some 70 percent of RAL recipients did not realize they
had taken out a loan.
RALs are big business: according to
the Children’s Defense Fund, New Yorkers in 2004 lost more
than $30 million of their tax refunds and credits to RALs. Gotbaum
said it was no accident that more than $23 million of that money
came from the pockets of low-income taxpayers.
Gotbaum said RALs are marketed most
aggressively in poor neighborhoods because commercial tax preparers
want to cash in on the Earned Income Tax Credit, a refundable
federal, state and city tax credit aimed at low- and middle-income
workers. By applying for all three credits, a city taxpayer can
receive a refund of as much as $5,940. The greater the EITC refund,
the larger the RAL finance fee a commercial tax preparer collects.
“The tax preparers’ marketing
strategy is part of a cynical effort to exploit one of the few
tax breaks designed to help low-income workers,” Gotabum
said. “My advice is simple: Take advantage of the EITC program;
don’t get taken advantage of yourself.”
Filing for the EITC can be intimidating
for low-income New Yorkers used to completing simple tax forms
like the 1040EZ; others face language and literacy barriers, making
them easy marks for unscrupulous commercial tax preparers.
Help is available at Volunteer Income
Tax Assistance (VITA) sites across the city offering working families
free tax assistance from volunteers trained by the Internal Revenue
Service. Tax Counseling for the Elderly (TCE) sites provide a
similar service for people 60 years of age and older.
Gotbaum’s website—www.pubadvocate.nyc.gov—features
the most comprehensive listing assembled of free tax preparation
sites, as well as information about EITC eligibility and other
resources. Many VITA and TCE sites are able to file returns electronically,
speeding delivery of refund checks, and help non-English speakers,
as well. Gotbaum suggested calling sites to check what’s
available. For those who cannot get online, she recommended calling
her office, at (212) 669-7250.
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