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Mayor Rahm Emanuel today announced the results of a citywide investigation on tax preparation services to protect residents who are seeking help preparing their taxes. The investigation found 65 percent of tax preparation businesses visited by City inspectors were not in compliance with the City ordinance regulating tax preparation services.
“We will not stand by and allow any business to take advantage of consumers. Commercial tax preparers must ensure that consumers know their rights and choices before using their services,” said Mayor Emanuel. “The City is committed to supporting hardworking Chicagoans, and has established help for qualified Chicago families and individuals to receive free tax return preparation and e-filing at tax sites located across the city.”
During the investigation, the City of Chicago Department of Business Affairs and Consumer Protection (BACP) investigated 409 known tax preparers and found that 65 percent of the businesses visited by City inspectors were not in compliance with City ordinance. As a result, four businesses received cease and desist orders; 13 received notices to correct their (limited business license) licensing; 334 Administrative Notices of Violations (ANOVs) were issued to 147 businesses that will have to appear at administrative hearings. Fines for each violation can range from $50 to $10,000 per offense. There is the potential for $94,600 to $340,750 in fines based on the ANOVs issued.
The businesses were cited for violations that include operating without a license, failure to provide a consumer bill of rights, operating illegally or without state of Illinois approval; and failure to provide written disclosure.
“I want to educate the public seeking these services to know their rights when working with a licensed tax preparer so ensure they aren’t being deceived while trying to pay their taxes,” said BACP Commissioner Maria Guerra Lapacek. “These investigations will continue in order to protect consumers from predatory practices. We will shut down unlicensed businesses and take action against businesses that don’t follow the City ordinance.”
In order for tax preparation service providers to operate in the City, the City mandates that tax preparers inform taxpayers of their rights and disclose any hidden fees, eliminate surprise costs and hard to find fine print during tax preparation. BACP requires require businesses to use easy-to-understand disclosure forms that clearly lay out all costs before the return is prepared.
The Consumer Bill of Rights Regarding Tax Preparation Services and an informational flier called Know Before You Hire a Tax Preparer — both available in English and Spanish — can be found here.
A tax preparer cannot force customers to use a Refund Anticipation Loan or a Refund Anticipation Check (RALs/RACs) if they seek general tax returns services. Some predatory commercial tax preparers have been found to use misleading practices and fine print to drive families into costly and unnecessary refund products like Refund Anticipation Loans and Refund Anticipation Checks without full disclosure.
The businesses being targeted under the ordinance also prey on taxpayers eligible for the Earned-Income Tax Credit (EITC), a critical economic support that allows hardworking low-income families to keep more of what they earn. Each year, approximately 100,000 eligible households in the City do not claim the EITC, leaving as much as $200 million in unclaimed dollars that could help individuals provide for themselves and their families.
Last year, the City’s free income tax assistance program helped more than 20,000 Chicago families and individuals receive more than $32 million in tax refunds and credits. This additional income not only has a direct impact on the lives of Chicago residents – it helps sustain our small businesses, strengthens our neighborhoods and infuses millions of dollars into our local economy. Chicagoans could receive up to $6,750 from the federal and state Earned Income Tax Credits.
The City’s Free Tax Prep Program provides qualified Chicago families and individuals free tax return preparation of state and federal returns for the 2014 year and, in some cases, prior years. Tax prep sites are located throughout the city and are open through April 15, 2015. For more information and to find the location nearest you, please call 311 or visit www.taxprepchicago.org.
With the availability of free tax preparation services across Chicago, and consumer protections through the City of Chicago Taxpayer Protection Ordinance, city residents can rest assured of getting high quality tax preparation assistance.
If a consumer feels there rights were violated, they should file a formal complaint with the City of Chicago, Department of Business Affairs and Consumer protection by calling 3-1-1. For more information on EITC, call 311 or visit the website at www.taxprepchicago.org to find the location nearest you.