DRS: Commissioner Warns Taxpayers: Beware Preparer Charges

Commissioner Warns Taxpayers: Beware Preparer Charges

 
For Immediate Release:
Friday, February 7, 2014

 

Hartford – Department Revenue Services (DRS) Commissioner Kevin B. Sullivan today advised taxpayers who have certain tax preparers file federal and state income taxes to be sure they understand exactly why and how preparer fees will be paid. 

 

Said Commissioner Sullivan, “Every year, too many taxpayers pay too much to many storefront tax preparers to make what are really relatively simple tax filings.  This includes the legal but nonetheless ill-advised practice of being lured into a high-cost refund anticipation loan (RAL) and similar financing arrangements with a tax preparer.  

 

Already this year, DRS is being contacted by many taxpayers who do not understand why the amount of their direct deposited state refund is less than the amount of the refund claimed on their tax return.   What they do not realize is that the preparer’s fee – usually for both a federal and state return – plus bank processing charges are being taken out of the state refund before the balance is deposited.”

 

This type of “Refund Anticipation Check” is different from a RAL.  With a RAL, the taxpayer gets an immediate, short-term loan and then repays the loan plus interest (sometimes at rates of 50% or more) when the refund is received.  Instead, certain tax preparers and the banks processing the refund deposits are deducting the whole preparation fee plus bank service fees from the first refund check processed.  Usually, the first refund processed and deposited is from the state.   As a result, most or all of the state refund amount may be taken to pay the preparer and the bank first.

 

Added Commissioner Sullivan, “This new gimmick is clearly misleading taxpayers about how much they are being charged and how much of the state refund they will ever actually have deposited.  My best advice is just don’t do it.  Taxpayers can easily use the DRS Taxpayer Service Center (TSC) system.  Using the TSC also means paying no bank deposit fees.  It a taxpayer does need assistance; there are free and reduced price tax preparation services widely available.” 

 

Low-income and elderly taxpayers can use Volunteer Income Tax Assistance (VITA) sites in their community where trained volunteers prepare federal and state returns free of charge.  For more information taxpayers should go to income tax portion of the DRS website at www.ct.gov/DRS.

 

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Content Last Modified on 2/14/2014 11:32:25 AM