Make sure you hire a legit tax preparer, like one of those advertising in our Focus on the Tax Season special section

With the 2012 tax filing season in full swing, Attorney General Eric T. Schneiderman issued tips to protect New Yorkers from tax preparation scams. The Attorney General also asked taxpayers to notify his office of any suspected fraudulent schemes designed to steal personal and financial information from consumers.

Scammers often prey on seniors or college students by impersonating tax authorities, solicit follow up information on a tax form, and collect identification numbers and social security information, which is then used to steal people’s money or identities. Some scammers have even gone to the extreme of using “spoofing technology” to make their caller ID numbers come up to look like they are from the IRS. The Attorney General’s regional offices throughout the state have received multiple complaints from consumers about tax preparation schemes like these.

In addition to these scams, there are tax preparation businesses that take advantage of consumers through a variety of other deceptive practices. One common tactic is to advertise low fees to get the customer in the door, only to increase the final fee by hundreds of dollars, claiming the tax return was more complicated. There are also offers of “instant cash” to help a consumer pay bills while waiting for their refund, but they can come with undisclosed fees and high interest rates. In addition, some business are just not equipped to handle the volume of business they take in, resulting in delays in getting the refund that one paid a premium to get “fast.”

“Preying on the desperation of people in a tough economy is unconscionable,” said Attorney General Schneiderman. “Tax season is stressful enough as it is – the last thing New Yorkers need to worry about is having their identities stolen by unscrupulous scammers.”

As taxpayers look for help in filing their taxes, Attorney General Schneiderman issued the following tips for consumers:

Use recognizable and established companies

Check the tax preparer’s qualifications

Check the tax preparer’s history through the Better Business Bureau

Check for disciplinary actions and verify licenses

Find out about disclosed and undisclosed service fees

Avoid those who base their fees on a percentage of your refund

Make sure the tax preparer is accessible, even after the April due date

Never sign a blank return

Review entire return before signing

Make sure the preparer signs the tax form and includes a Preparer Tax Identification Number (PTIN)

Check out free informational services from your local government and online

Avoid “too good to be true” promises

Consult New York’s “Consumer Bill of Rights Regarding Tax Preparers”

Consumers should also beware of refund anticipation loans (RALs) and refund anticipation checks (RACs). RALs are often marketed as “instant” or “24-hour” refunds but are actually high cost loans than come with fees and interest that reduce the amount of any refund. New York law, General Business Law section 372 (known as the Consumer Bill of Rights regarding Tax Preparers), requires RALs to be marketed as loans not refunds. The preparer must give the consumer a written disclosure that explains:

You are not required to take out a refund anticipation loan or refund anticipation check in order to receive your tax refund

The amount of fees and interest you will have to pay if you take out a refund anticipation loan or refund anticipation check

The amount you will receive after the fees and interest are deducted

The annual percentage rate of interest that you will be charged

The amount your refund will be if you don’t take out a refund anticipation loan

Consumers can avoid the costs of refund anticipation loans and checks by filing their return electronically and having refunds directly deposited into their own bank account. The law does not apply to attorneys, CPA’s and certain others who prepare tax returns. However, even those preparers must comply with the requirements regarding refund anticipation loans.

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