Troubleshooter Investigation: overcharging for tax prep common
LOUISVILLE, KY (WAVE) - It's tax time. With the April 17 deadline fast approaching, there's all sorts of walk in tax preparers vying for your business, but they could up taking a much bigger cut from your refund than they deserve, if you're not careful.
Corey Coffey is a musician and a bartender, and his story is an example of what can go wrong, when you choose the wrong person to do your taxes. He doesn't make a ton of money, but you would think he does after seeing the bill he got from Liberty Tax Service on Bardstown Road.
"A lot of people were like you got an LLC or something," Coffey said of people's reactions when they saw how much Liberty charged to prepare his taxes.
An invoice obtained by the WAVE 3 Troubleshooter Department reveals Coffey paid more than $806 to have Liberty do his 2010 tax return, which was a no frills, 1040. According to his return, Coffey's taxable income that year was a little more than $8,000.
Coffey said he was in and out in about 10 minutes.
"I think it's like $100 per minute," Coffey said of the rate he was charged.
The fees were taken right out of Corey's refund check so he said he didn't realize how much he was being charged until after the fact.
Coffey said he complained to Liberty's corporate office, but said he never got a response and chalked it up to a costly lesson learned.
Then this year he saw a Facebook friend singing Liberty's praises.
"And she says 'Hey come to Liberty Tax Service, well do great on your taxes,'" Coffey said of the post. "And I put on there no, no, no. Liberty Tax Service took a lot of money from me."
And not just from Coffey. A report from the National Consumer Law Center released in February 2012 revealed a mystery shopper was charged $540 to prepare a tax return at an unnamed Liberty Tax Service, which has locations nationwide.
"It's not fair in some situations," said Rob Koons, owner of the Liberty Tax Service Coffey used. "And when I hire managers, they have to make the right judgement calls."
Koons acknowledged tax preparers can charge different customers different amounts, adding that he runs an honest business and didn't know Coffey had been overcharged until his Facebook post. Koons said he immediately agreed to refund Coffey's money.
But Coffey said he didn't actually get that refund, until the WAVE 3 Troubleshooter Department launched its own investigation.
Koons now admits a $400 charge on Coffey's invoice, listed as "other tax preparation fees should not have been included in Coffey's bill.
"It shouldn't be there," Koons said. "It just flat out shouldn't be there."
Koons told WAVE 3 Troubleshooter Eric Flack, Coffey should have been charged about $400 to do his 2010 1040, but that also seems excessive according to that report from the National Consumer Law Center.
Koons said even tax returns that seem simple can require a lot of work, especially when preparers maximize deductions and refunds. He also said the average fee at his locations are down $50 in the past three years, to around $238 a return, adding more than fifty percent of his businesses is repeat customers.
"You can't retain clients by being dishonest," Koons said. "Mistakes happen, and in this situation a mistake happened."
Corey Coffey said mistakes like that won't happen to him anymore, noting he'll do his own taxes from now on.
"I'll never trust anyone to do them again," Coffey said.
The National Consumer Law Center's report lists a number of things to watch out for. Here's what the NCLC report said about add-on fees:
Some of the names for add-on fees that we have observed include:
The NCLC report went on to say add-on fees are how a lot of tax preparation services make their money. Another problem is when the businesses try and hide those fees. More from their report:
The NCLC report said all three of the major tax preparation chains-H&R Block, Jackson Hewitt, and Liberty Tax-had promised to stop charging add-on fees several years ago but the practice continues in different forms.
Another consumer- related problem faced by taxpayers is the lack of transparency around tax preparation fees. Mystery shopper testing by consumer groups and others has found systemic problems in the ability of consumers to obtain information about how much tax preparation services will cost. There are numerous examples of preparers giving low-ball estimates on preparation fees or even refusing to provide testers with a quote.
There are multiple types of add-on fees.
· Application fees;
· Data and document storage fees;
· Document processing fees;
· E-filing fees;
· Service bureau fees;
· Transmission/software fees;
· Technology fees.
Some preparers will charge several add-on fees. The cumulative impact of add-on fees can be very expensive. Mystery shopper testing by consumer groups found add-on fee totals ranging from $25 to $324 in 2008;63 $19 to $85 in 2010;64 and $35 in 2011.