DENVER—As millions of consumers rush to file their taxes by the April
15th deadline, CoPIRG issued an April Fool’s Day warning to consumers
to watch for outrageous fees and sloppy privacy practices at tax preparation
centers.
“Consumers should not be fooled when filing their taxes this year,”
said CoPIRG Consumer Attorney Nicole A. Boojamra. “Some tax preparers
charge outrageous fees to deliver refunds only slightly faster than the IRS,
and some do not adequately guard consumers’ financial privacy.”
“Shoulder-surfing” at Tax Preparation Booths Could Lead
To Identity Theft
In February 2004, the state PIRGs surveyed over a dozen tax preparation booths
of H&R Block and Jackson Hewitt located in Wal-Mart stores nationwide. The
group found glaring holes in privacy policies that could lead to identity theft.
In one case, a PIRG surveyor was left alone with another consumer’s completed
tax forms. In all but one case, tax preparer’s desks were set up so that
passersby or shoppers could easily steal private information from computer screens
or papers on tax preparer’s desks.
“Companies that handle our personal financial information must do more
to prevent identity theft,” commented Boojamra. According to the Colorado
Attorney General, identity theft is the number one consumer crime currently
occurring in Colorado.
While CoPIRG has filed a complaint with the Federal Trade Commission to investigate
privacy practices at tax preparation booths, the group issued the following
recommendations for consumers:
- choose tax preparers whose locations are secure from prying eyes or ears rather
than those in high traffic areas like food courts or supermarkets;
-
keep documents containing names, addresses and social security numbers hidden,
such as storing them in folders while waiting in line; and
-
insist that the tax preparer take all proper precautions to guard your data
after you leave the store, such as locking up or shredding sensitive documents
Instant Tax Refunds Come with Big Fees
Refund anticipation loans (RALs) are marketed to consumers as fast refunds,
but are actually loans that come with big fees, warned CoPIRG.
“Instant refunds are a way for lenders to charge ridiculous interest rates
on what are really small loans with outrageous fees that eat away at your refund,”
said Boojamra.
According to a recent report by the National Consumer Law Center (NCLC) and
Consumer Federation of America (CFA), the various fees associated with these
loans translate into effective annual percentage rates (APRs) ranging from 70%
to 1,837%. The NCLC and CFA report showed a RAL for an average refund of around
$2,100 will cost a total of $132 and bears an effective annual percentage rate
(APR) of about 180%.
CoPIRG urged consumers to skip the expensive RALs, and instead use free options
offered by the IRS to help speed up your refund. “The IRS allows consumers
to file electronically or over the phone, and to receive their refund by direct
deposit for free,” commented Boojamra. In many cases, those refunds can
appear in consumers’ bank accounts in as little as ten days.
“Consumers can avoid being fooled, ripped-off or defrauded this tax season
by guarding their financial information and avoiding refund loans offered by
tax preparers,” concluded Boojamra.
The mission of CoPIRG is to be the premier public interest organization
in Colorado. For more information visit www.copirg.org.
