A Georgia consumer group is warning citizens that lax oversight and training for tax preparers has left citizens across the state vulnerable to fraud, errors and excessive fees.
In a report due out Tuesday, Georgia Watch calls for state leaders to reform the system and require tax preparers to be licensed, have minimum training standards and be answerable to a board that would oversee the industry. Currently, Georgia is among 46 states that has no licensing or training requirements for tax preparers.
“It’s absolutely crazy,” said Liz Coyle, executive director of Georgia Watch. “People have no idea what level of education these people have, how honest they are, what they are really going to do with their personal information and whether or not they’ll file their taxes accurately.”
The group’s report follows an AJC/Channel 2 Action News investigation into a Hapeville tax preparer who inflated the refunds due her clients and is accused of defrauding them through stolen refunds or bogus investments.
Georgia’s Department of Revenue launched an investigation into Ruth Barr’s tax business following reporters’ questions about the alleged fraud. Agents raided her offices in May and recovered thousands of tax files, which have become the basis of a possible criminal case against Barr, who is an elected member of the Hapeville City Council.
Thousands of Barr’s customers could be facing problems because of the work she did. The state is planning to sending letters to her clients, many of whom may owe fines or back taxes because of the inflated refunds Barr and her business claimed.
Undercover clients get bogus advice
Georgia Watch sees Barr as emblematic of problems with the tax preparation industry. The group’s report is based on research it did by sending undercover customers into 20 tax preparer sites in southwest Atlanta during tax season. Each of the undercover clients were given bad advice or had some sort of problem with their return, usually a refund that was inflated.
One of the fake customers pretended to be a graduate student, the other posed as a single mom, who only had her child on weekends, which is not eligible for deduction.
They recorded their conversations with the preparers.
“A lot of people wanted to make sure that I claimed the child,” one of the undercover researchers said. “It can get you back $5,000 to $6,000 if you claim the child.”
When she had her taxes done correctly by a group that works with the IRS, she should have owed about $200. One of the places she visited got her a $4,000 refund.
“And a lot of these places are not going to back their work or their refunds and so you’re out of pocket,” if the government audits the return, she said.
No state oversight for preparers
The preparers in the study were located in storefronts and marketed themselves with signs promising fast and hefty refunds. Some offered almost instant refunds that would result in high fees charged to the customer. None of the businesses in the Georgia Watch study had a Certified Public Accountant on staff and the group found tax preparers with a “stunning lack of knowledge and professionalism.”
“It’s a tremendous problem,” said Coyle. “In Georgia, the person who does your hair or your nails has to be licensed and registered. There’s none of that for the individuals who prepare your taxes.”
Georgia Revenue Commissioner Lynne Riley said her agency does not regulate preparers and the only avenue for oversight is a criminal investigation when a complaint is filed to her agency. She said the state should be exploring options that give taxpayers confidence that the people doing their taxes are qualified.
“It is a buyer beware situation today,” she said.
Georgia Watch recommends that preparers be required to take 15 hours of continuing education each year, pass a competency test and provide taxpayers a clear fee schedule to avoid price gauging. The group’s proposal would give some exemptions for CPA’s, attorneys and tax preparers who are enrolled with the IRS.
“We absolutely want Georgia to put in place some common-sense regulations of this industry,” Coyle said. “We should be looking to protect taxpayers in every way we can.”
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Channel 2 Action News investigative reporter Jodie Fleischer contributed to this report.