I-Team: NY Tax Preparers Rack Up Violations, Fines

Undercover sweeps lead to $1 million in fines

By Tom Burke and Lynda Baquero
|  Wednesday, Aug 8, 2012  |  Updated 1:43 PM EDT
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Surprise inspections and undercover stings catch about one-third of New York tax preparers breaking the rules and deceiving clients, according to the Department of Consumer Affairs. One owner said he did not commit one of the violations, and has corrected another. Lynda Baquero reports. This story was published Feb. 29, 2012 at 11:34 a.m.

Surprise inspections and undercover stings catch about one-third of New York tax preparers breaking the rules and deceiving clients, according to the Department of Consumer Affairs. One owner said he did not commit one of the violations, and has corrected another. Lynda Baquero reports. This story was published Feb. 29, 2012 at 11:34 a.m.

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Surprise inspections and undercover stings catch about one-third of New York tax preparers breaking the rules and deceiving clients, according to the Department of Consumer Affairs.

“There’s a lot of money in taxes,” said Consumer Affairs Commissioner Jonathan Mintz. “We did 850 inspections in the last couple of weeks and we issued, unfortunately, about 1,000 violations with fines that will total about $1 million.”

With a hidden camera, the News 4 I-Team accompanied one of the inspectors as he made surprise visits to tax preparers in lower Manhattan.

At Liberty Tax Service on Maiden Lane, the inspector asked a number of questions, posing as a customer. Liberty Tax is an independently owned franchise.

After a short conversation with one of the employees, the inspector showed his badge and wrote seven violations against that specific office of Liberty Tax, including not disclosing all the fees on their Refund Anticipation Loans, and for marketing their services in a foreign language without written disclosure about all their fees and policies in that language.

Refund Anticipation Loans, or RALs, essentially offer the client instant money based on their expected tax refund from the government.

The owner of Liberty Tax Service on Maiden Lane and at East Houston Street told News 4 that all the fees for their Refund Anticipation Loans are “posted on the wall.”

He also said the sign marketing their services in Chinese has been taken down since the inspection.

Mintz told News 4 that RALs can have astronomical interest rates.

“It's a real problem,” he said. “The FDIC and other regulators have been putting a lot of pressure on the banks who back these loans."
 
Each client is supposed to receive a free copy of a “Consumer Bill of Rights” from their tax preparer before starting any service.

It lists questions to ask and explains what the tax preparer should, and should not, do.

“You want to know exactly how much it's going to cost you, you want to know who they are, what their credentials are,” said Mintz.

He also said to make certain they’re going to back up with the IRS in case you are audited.

New York does offer free tax services at 69 locations around the city for families making less than $50,000 a year, and individuals earning $18,000 or less. For a list of those tax sites, go here.

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