Tax Refund Services Can Take Bite Out of Benefit

March 12, 2012
Bradenton Herald (FL) 

Companies that offer to prepare tax refunds quickly for a low fee or even for "free" may seem appealing, but these programs often come with excessive costs and can end up siphoning a significant chunk out of a filer's return. A case in point is Karen Everette of Raleigh, N.C., who took her W-2 form to Liberty Tax Service after seeing the company's promotion of a $50 immediate refund for customers who filed their returns there. Everette received the $50 and was told her refund would be $292; but by the time Liberty deducted fees for preparing her taxes, she received just $13.50. Jennifer Toney, owner of the local franchise, said Liberty offers a form-based service and argued that Everette was "fairly charged" for the tax return she had prepared; but Everette said she never would have gone to Liberty if she had known about the egregious fees ahead of time. Chris Kukla, senior counsel for the Center for Responsible Lending, says lower- and middle-income workers are increasingly susceptible to offers that promise to prepare tax returns and deliver quick refunds for fees lower than an accountant would charge. One Durham-based nonprofit that connects low-income workers with free tax preparation services said Liberty and similar companies are not doing anything illegal but that their advertisements are misleading. The Internal Revenue Service's Volunteer Income Tax Assistance (VITA) program prepares tax forms free of charge for individuals earning less than $50,000. Consumer groups say if taxpayers still choose to use a tax-preparation service or a CPA, they should request an estimate ahead of time and ensure the price includes both federal and state returns and fees for additional forms and that it also explains how many forms are needed to file the return.
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