(CBS) – This tax season, Chicagoans have some new protections to help make sure they aren’t ripped off by tax preparers.
CBS 2 has learned that investigators from the Chicago Department of Business Affairs and Consumer Protection have gone undercover into the offices of hundreds of tax preparers and found more than 80 percent of them in violation of strict new ordinances.
2 Investigator Pam Zekman tagged along with investigator Miguel Campos. He posed as a potential client to make sure the tax preparers give their customers a “Taxpayer Bill of Rights” and disclosure forms listing their services, the price for each service, and an estimate of what the total charges.
“So they don’t try to price gouge later,” Campos explains.
Campos didn’t get the required written disclosure form at Zavala and Associates, 4207 W. 63rd St., so he returned to give the owner, Juan Zavala, citations for the violations.
Zavala said he never received information from the city about the new requirements. He also said he treats his clients fairly and has never had any complaints.
But since he did not have a current business license the city investigator shut him down until he got one.
At Absolute Tax Service, 4374 Archer Ave., Campos says an employee there told him it would cost $100 for the company to do his tax return, if he paid up front. It would cost $150 if the company took their fee out of his refund check when it arrived, he said he was told.
That amounts to a refund anticipation loan at 50 percent interest over 8 days, the city explained – and that’s illegal.
The manager at Absolute Tax Service says the extra amount is for the fees she has to pay a bank for the arrangement. She says she advises clients not to pay the extra amount. She says she does supply them with the written disclosure forms she received from the city two to three weeks ago.
Abuses by tax preparers are a big problem, says David Marzahl, from the Center for Economic Progress, who pushed for the new city disclosure laws.
“We’re talking billions of dollars that people are getting in tax refunds in Chicago every year,” Marzahl says.
And because the IRS is currently under a federal court injunction prohibiting it from enforcing its tax preparer regulations, Marzahl says: “Unfortunately this is an industry like the wild west. There is no level of competency required.”
Leroy Grant says the new city ordinance would have protected him last year when a tax preparer quoted him a $225 fee after he started working on the return.
“I said, ‘$225 — hold up! Last year you only charged me $40,’” he says.
He told the tax preparer not to file his return and says the company agreed. Then he went to the Center for Economic Progress and got it done for free.
After waiting two months for his $545 refund, Grant learned his refund had been sent to the first tax preparer— the company he had fired.
Then, Grant says, the company representative told him he would have to pay the $225 fee.
Grant, a $500 a week maintenance man, says the company held his check hostage until he agreed to a lower fee of $175 because he needed the money.
“They were trying to take advantage of me and rip me off,” he says.
CBS 2 could not reach the company for comment.
If you have any complaints about a tax preparer you should contact the Chicago Department of Business Affairs and Consumer Services.
And if you qualify for help, you can get it for free at the Center for Economic Progress, which has several service centers.