Tax pitfalls to avoid: bad preparers, high fees and more

Tuesday, March 01, 2016

Don’t let yourself get taken advantage of this tax season. Things can get bad when consumers are blind to common tax pitfalls, so bad in fact that two major consumer advocacy groups just issued warnings outlining the many risks, ranging from the use of unregulated and uneducated tax preparers to outrageous fees for filing to sketchy tax-related financial products.

Let’s dig in to this some more, starting with tax preparers. According to the Consumer Federation of America, “In all but four states paid tax preparers are not required to meet any minimum educational, competency or training standards.” Yikes! While an incompetent preparer can cost you part of your refund, a fraudulent preparer can cost you even more. So how do you know if your preparer is qualified? The IRS offers a handy searchable directory that lists the preparers in your area with professional credentials.

When it comes to fees for filing, one of our allies at the National Consumer Law Center put it best when she called the lack of transparency and disclosure “appalling.” As a matter of fact, the Washington Post recently reported that the average accountant’s tax prep fee is now a whopping $273! So make sure that your tax preparer gives you an upfront list of fees before you agree to their services. (Of course, there’s a good chance you can just file your own taxes for free.)

Finally, there are other tax-related products that can cost you, like refund anticipation checks and loans (read more about those here.)