A Cautionary Tale from United Way
United Way of Southwest Alabama (UWSWA) and the South Alabama Free Electronic-File (SAFE) Coalition know that the holidays are a time of financial burden for many in our community and warn taxpayers to not fall prey to predatory tax preparers, who often cost taxpayers more money by promising immediate payment of tax refunds.
Our warning is shared through this cautionary tale. It’s not a story that we would necessarily brag about, at least in the conventional ways we brag about things. But it’s a story that is important for us all to know. It’s a story that affects lives.
A lady came to one of our Volunteer Income Tax Assistance (VITA) tax preparation sites because she had received a letter from the IRS stating she owed money from a 2014 tax filing. She had paid a fly-by-night preparer $450 to do her 2014 return. It was full of errors – intentional omissions and obvious invalid claims for credits – all the typical hallmarks of a fraudulent return prepared by an unscrupulous tax preparer. The IRS refigured her return and stated she owed thousands of dollars.
Before she found out about this problem, though, she went back to the same person to do her 2015 taxes and paid another $450. Having little faith that the 2015 tax return was prepared any better, we also looked at that return. This one featured more false omissions, additions, and expenses.
It was clear from our careful interview with the taxpayer that she truly had no idea that her returns showed what they did. She answered our questions willingly and as completely as she could, but we are confident she did not ask for the return to be prepared the way it was. Of course, she couldn’t get the “preparer” who did this work to respond to her calls once she received the letter from the IRS.
Here’s the good news: Our VITA volunteer tax preparers, who are trained and certified by the IRS, met with her to assess her situation and bring the problem to a resolution. Are we hopeful that we can get her a big refund? Absolutely not. Are we thinking we can keep her from owing the IRS? No, we don’t have much hope for that either. But what we hope to do is help her straighten out her tax situation once and for all and restore her confidence that her situation with the IRS is at least under control again. Also, we have mechanisms in place to report fraudulent preparers to the IRS, and we hope to do that to prevent more people from being abused in the same way.
For many households, tax refunds can be the biggest check they’ll receive all year. And eagerness for that check can make people especially vulnerable to large service fees and predatory lending practices. Your United Way asks you to be cautious of any promises from tax preparers that sound too good to be true.
VITA programs offer eligible workers a FREE alternative to more costly, and often predatory, tax preparation services, saving tax payers an average of $200 in tax preparation fees. The sites are staffed by IRS trained and certified volunteers and have a far lower error rate than many self-and paid-tax preparation services. Corporation for Enterprise Development (CFED) experts found that VITA programs across the country had a near-perfect tax return accuracy rate of 94% in 2015.
For more information about the VITA program, visit www.irs.gov, keyword “VITA.” Appointments for free tax preparation will not be taken before early January, but can be made after the holidays by calling the United Way 2-1-1 Help Line. Just dial 2-1-1 or toll-free 1-888-421-1266.
About South Alabama Free E-File (SAFE) Coalition
The SAFE Coalition is a group of community organizations that provide low and moderate income and the elderly FREE income tax return preparation. We also make referrals to other services, such as opening bank accounts, budgeting, and credit counseling. Members of the SAFE coalition include Boat People SOS, Goodwill Easter Seals of the Gulf Coast, Impact America, Mobile Community Action Inc., RSVP of Mobile County, United Way of Southwest Alabama, New Shiloh Missionary Baptist Church.