COC works to hold tax prep companies accountable
By Color Of Change staff
Ever wondered why some of the hardest-working, responsible people pay a private company to prepare their taxes to get a refund and risk mistakes — or worse — an audit?
Simply put, the tax preparation industry is deceitful. Brick-and-mortar preparation services like H&R Block, Jackson Hewitt and Liberty Tax Service are known to employ unqualified and unlicensed workers known as unenrolled preparers. Millions of individuals frustratingly surrender their hard-earned money to companies like H&R Block and Intuit — to the tune of $13 billion annually — being duped in the process, just to claim what is rightfully theirs.
The federal Government Accountability Office estimates that 60% of returns submitted by paid preparers contain errors. People then may have to fork over even more money and are left to face the IRS alone when they are audited.
More than 112,000 taxpayers have reported fraud or misconduct by their tax preparers during the last decade, according to IRS records. A January 2023 study revealed alarming discrepancies in the IRS auditing rates, with Black taxpayers audited at markedly higher rates than their non-Black counterparts.
That’s why Color Of Change is collecting stories from members who have experienced problems using storefront tax prep services. COC wants to hold these companies to account and for hard-working, low-wage workers in Black communities across the country to keep money in their pockets rather than paying unscrupulous companies for services that should be free.
“We’re entering a time where some accountability is being demanded,” Brandon Tucker, COC’s senior director of Policy & Government Affairs, said during a social media discussion hosted by COC on Jan. 29, the first day of the tax filing season.
Igor Volsky, executive director of Groundwork Action, joined Tucker to talk about the IRS’ free Direct File pilot program that will help working-class people keep money in their pockets rather than paying for-profit tax preparation companies for services that should be free just to claim their refunds.
COC and Groundwork Action are members of the Coalition for Free and Fair Filing, a group committed to supporting the IRS’ efforts to create a free, online tax-filing tool. The coalition’s goal is to ensure all U.S. taxpayers can easily file tax returns and get the tax credits they deserve by safeguarding and expanding the IRS Direct File program.
An estimated 87 million taxpayers lose as much as $13 billion of their refunds to tax prep fees annually because the tax prep industry makes it difficult to access the free file system.
Earlier this year, the Federal Trade Commission found that Intuit’s TurboTax engaged in deceptive advertising and banned the company from advertising free filing services unless they are free for all customers. Additionally, as a result of a multi-state settlement In May 2022, the company agreed to pay $141 million to lower-income Americans who were “unfairly charged” for services that should have been free.
On Feb. 23, the FTC also announced it has initiated action against H&R Block for deceptively marketing “free” online filing.
“Big companies like Intuit, H&R Block and others are preying on us,” Tucker said. “That’s why this issue is important to us. We’re here to ensure (tax filing) gets easier and more accessible to folks.”
But the lucrative tax prep industry has spent millions of dollars pushing its products and lobbying to protect its interests and profits. Intuit’s TurboTax even aired a commercial during the recent Super Bowl promising $1 million to a lucky customer. But to qualify, you have to pay them for a service that should be free.
Tax prep companies also have spent massive amounts lobbying against the IRS’ pilot free file program launched in late January. The program allows qualifying taxpayers in Arizona, California, Florida, Massachusetts, Nevada, New Hampshire, New York, South Dakota, Tennessee, Texas, Washington and Wyoming to directly file their taxes with the IRS without charge.
The companies also have supported Republican efforts to slash the IRS’ budget by $30 billion, which would hamper the free, direct file program and impede the agency’s enforcement efforts to go after wealthy tax cheats.
In 2021, roughly $688 billion in taxes were owed to the federal government but not paid. The IRS issued notices to 1,600 millionaires who each owed more than $250,000 in taxes and, as a result, $122 million already has been collected.
A modernized IRS is essential to prevent corporations from exploiting Black people and to promote economic equity.
Help us hold the industry accountable. Share your story: Have you ever had your taxes done in a storefront location and they were done poorly and inaccurately?