Mar 25 2011
How Tax Preparers Fleece The Poor
Every afternoon when I drive home from work, going up Lake Avenue in Pasadena, I’m treated to a dancing Statue of Liberty dressed in garish green, advertising Liberty Tax Preparation. It’s not just H&R Block outlets any more – tax preparation store-fronts have proliferated in the last few years. But even though everyone has to file taxes, these tax-preparers are ominously located in poor, often minority neighborhoods, tucked somewhere between the Rent-A-Center and the Pay-Day Loan centers. In a detailed investigative report, journalist Gary Rivlin exposes these tax-prep chains in the latest issue of Mother Jones magazine. While it should hardly come as a surprise that there is an element of exploiting the poor at work, what is shocking is how lucrative a business it is to prepare people’s taxes. Rivlin reveals that what brings the working poor in through the doors of these store-fronts is the promise of an upfront loan based on their returns. Taxes filed after January 15th usually yield IRS returns in 15 days. But customers desperate for cash are led to believe they could have to wait weeks for it, unless they get an instant loan in the amount of their return minus a bunch of fees. Many banks working with the tax preparers were involved in the sub-prime mortgage crisis, and now even private equity firms and hedge funds are being lured by the promise of easy profit. It’s not the loans that make the tax-preparers their money however – it’s the actual tax return filing enabling these companies to charge someone upwards of $300 for a 10-minute data entry task into a piece of software.
GUEST: Gary Rivlin, Freelance journalist, a former staff writer at the NY Times, his work has appeared in the Sunday Times Magazine, Salon, and Newsweek, and he is the author of BROKE USA, which comes out in paperback in June.
Find Gary Rivlin’s article at http://motherjones.com
File your taxes for free directly through the IRS here: http://www.irs.gov/efile/article/0,,id=118986,00.html
3 Responses to “How Tax Preparers Fleece The Poor”
I loved this piece – I didn’t even know I qualified for a refund as I’ve been out of the system and the country for so long. But you said you were going to list the links on your website, about ways to file on your own or online, and you’d put the links up… but sorry, I can’t find them? Thanks!!!
I agree the RALs are a ripoff and that is why I won’t offer them. But “10 minutes of work” into “some piece of software.” Really? You really think that? For a $300 tax return it takes alot more than 10 minutes. We have a preparer and then it goes through a review by a CPA. That software costs about $8,000. And we spend a minimum 100 hours of CPE every year to keep up with the tax laws. There is a lot more to it than 10 minutes…
…not to mention how many fried-chicken restaurants appear to be located in predominantly African-American neighborhoods. It is high time the public is made aware of these predatory feeding practices!
We live in a free market economy. There is no Pied Piper leading these folks, who you disgustingly decree to be incapable of making their own decisions, to the evil tax preparers you describe.
Three cheers for the Nanny State!