Friday, January 23, 2009
By STEVE DOYLE
Times Staff Writer steve.doyle@htimes.com
Impact chief calls preparers, errors shocking, willful
A nonprofit group had its employees go undercover this month to proveAlabama’s tax preparation industry needs government oversight.
But Impact Alabama President Stephen Foster Black said even he was surprised how much unscrupulous behavior they found. He said 11 of 13 businesses, including two inHuntsville, cheated by claiming the federal Earned Income Tax Credit for customers who did not qualify.
Several offices also told customers not to report $1,700 in outside income from baby-sitting and lawn care jobs, Black said.
“I was shocked to find they made not just negligent mistakes, but fraudulent, willful mistakes,” he said during a news conference Thursday outside the Madison County Courthouse. “Had we actually filed the returns, it would have been a federal and state criminal act by the preparers.”
Black said he hopes the experiment persuadesAlabamalawmakers to regulate paid tax preparers. He is pushing a bill that would require them to be licensed by the state, pass a proficiency exam and attend classes to stay abreast of tax code changes. State Rep. Laura Hall, D-Huntsville, has signed on as a co-sponsor.
Alabama licenses hairdressers, manicurists and liquor stores, “but then you get to the person who’s preparing a family’s most important document, and there’s nothing,” Black said.
Most of the businesses visited by Impact Alabama workers charged “exorbitant” fees of up to $405 to prepare a simple, nonitemized tax return, Black said, and pushed rapid refunds for an additional cost. Same- or next-day refunds are high-interest bank loans repaid with the proceeds from a customer’s tax refund, he said.
Impact Alabama, tied to the University of Alabama’s Center for Ethics and Social Responsibility, had employees pose as single parents with weekend custody of their children. To be eligible for an Earned Income Tax Credit, a parent must have custody at least six months out of the year. Even though the Impact Alabama workers clearly explained that they had less than halftime custody, Black said, a majority of preparers allowed them to claim the credit.
“This is not just defrauding the federal government and taxpayers—it’s hurting the rightful parent,” he said.
One of the cases happened at an H&R Block office inBirmingham. In a statement e-mailed to The Times, the company said it has a “zero tolerance policy for intentional misstatements by our personnel, and we will not hesitate to terminate any employee whose behavior does not comport with this standard.
“We will follow up on this incident involving one of our employees, and we appreciate Impact Alabama bringing this occurrence to our attention.”
Kansas City-based H&R Block said its 120,000 tax preparers average 450 hours of tax training.
“We try to equip our tax preparers as well as humanly possible to understand the tax code and all its rules, and to apply it accurately since we stand behind every return we prepare,” the company said.
Commercial preparers have an incentive to falsify tax credits and underreport income because their fees are often tied to the size of a customer’s refund, Black said.
“There’s such a huge profit motive … that they’re willing to act badly,” said Black, whose grandfather was the late U.S. Supreme Court Justice Hugo Black.
The undercover probe targeted tax preparation offices in Huntsville, Birmingham, Montgomery, Tuscaloosa, Anniston and Opelika.
