ALBUQUERQUE—As millions
of consumers rush to file their taxes by the April 15th deadline, NMPIRG 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 NMPIRG consumer advocate
Ray Prushnok. "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,
NMPIRG 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 Prushnok. According to the Federal Trade Commission (FTC), 1,317 New
Mexicans reported being victims of identity theft in 2003, up from 822 in 2002
and less than 500 in 2001.
While NMPIRG 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 NMPIRG. "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 Prushnok.
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 percent to 1,837 percent. 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 percent. For
comparison, most credit card APRs are less than 18 percent.
NMPIRG 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 Prushnok. 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
McConnell.
