Eager tax filers urged to beware of scams

It's time to start rooting through that shoe box for receipts and check stubs.

With the economy stung by recession, tax filers will be scrambling to get those refunds fast, but tax preparers caution against deceptive practices that could chisel away at your return or land you in front of an Internal Revenue Service agent asking a lot of questions.

"This year is going to be particularly difficult," said Catherine A. Apker, executive officer for the California Society of Enrolled Agents, based in Sacramento. The organization represents "enrolled agents," who are federally licensed to prepare taxes and can represent taxpayers who are audited.

Tax preparers who offer an advance loan on refunds can charge exorbitant fees, Apker said. People unfamiliar with how refunds are distributed or others who are desperate for money are often targeted, Apker said.

"They take people to the cleaners, they really do," she said.

The practice of offering "refund anticipation loans" has been scrutinized by consumer advocates and legal authorities. California Attorney General Jerry Brown recently won a $4.85-million settlement against tax-preparation giant H&R Block over what he called deceptive advertising.

The settlement requires H&R Block, which denied wrongdoing, to be more up front about the terms, fees and other costs.

Opting for direct deposit on your tax forms will mean refunds can be deposited into your bank account in two weeks, said Linda Dong, executive vice president of the California Society of Accounting and Tax Professionals. Consider that before agreeing to advance loans, she said.

Tax preparers have different levels of expertise, from tax attorneys and certified public accountants to state-certified tax preparers, and their fees will range accordingly. The fee for preparing a return should be based on its complexity, not the amount of the return, Dong said.

Beware the gimmicks, Dong said. She recalled one tax preparer who set up a buffet dinner for customers, which raised her suspicions.

Guaranteeing a refund or claiming to boost your refund are also suspicious come-ons, she said. "If one guy is going to give you a $800 refund and another one says he can get you $2,800, you better ask why," she said.

Standard enhancement

New for this year, tax filers taking the standard deduction can also deduct real estate taxes paid in 2008. The maximum real estate deduction is $500 for single filers and $1,000 for married taxpayers filing jointly.

Eager tax filers urged to beware of scams 01/24/09 [Last modified: Saturday, January 24, 2009 3:31am]

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