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FOR IMMEDIATE RELEASE
March 19, 2009
Contact: Sarah Krauss
(212) 669-4193
Release #: 008-2009
Gotbaum: Beware of Tax Refund Loan Scams
- Releases annual tax guide to help New Yorkers save money -
EITC Guide
MANHATTAN - Public Advocate Betsy Gotbaum today cautioned New Yorkers to steer clear of unscrupulous commercial tax preparers that offer costly “instant refunds.” The loans, known as Refund Anticipation Loans (RALs), can cost New Yorkers hundreds of dollars in fees and carry exorbitant interest rates of as much as 700 percent. To help New Yorkers access free and low-cost tax assistance and provide them with information about the Earned Income Tax Credit (EITC), Public Advocate Gotbaum has prepared a user-friendly guide, Guide to the Earned Income Tax Credit and Free Tax Preparation Service.
Public Advocate Gotbaum said, “Tax season is upon us, and in these tough economic times it is important to do all you can to maximize tax savings and steer clear of refund loan scams. A host of tax preparers claim to offer an ‘instant refund’, but it’s a bad deal – any way you cut it. What they are really offering is an expensive, high-interest loan that can cost working families hundreds of dollars. New Yorkers need to know that free and low-cost tax assistance is available and that they can save money by walking into one of the free tax preparation sites around the city, and that’s why we have compiled this free guide.”
New Yorkers who file electronically and use direct deposit into a bank account should receive their money in 8-14 business days which avoids paying any RAL fees. According to a Treasury Inspector General for Tax Administration (TIGTA) RAL Report, 85% of survey respondents said they would have been willing to wait up to nine days to receive their tax refunds directly from IRS, which would have avoided the loan fees.
Tax preparers use misleading advertising to market the RALs aggressively to less affluent neighborhoods; many low- and moderate-income New Yorkers are eligible for the EITC, a refundable federal, state and city tax credit. By applying for all three credits, a city taxpayer can receive a refund of up to about $6,500.
The Office of the Public Advocate’s “Earned Income Tax Credit and Free Tax Preparation Services in New York City” guide has been updated to reflect the important changes to the EITC for 2008 tax returns. For example, there is an increase in the maximum amount of income families and individuals can earn and still qualify for the credit. Free tax assistance is still available to eligible families and individuals and the guide includes a list of sites that provide free Volunteer Income Tax Assistance and Tax Counseling for the Elderly in New York City.
The Internal Revenue Service (IRS) describes the EITC as "a refundable federal income tax credit for low to moderate income working individuals and families.” Congress originally approved the tax credit legislation in 1975 in part to offset the burden of Social Security taxes and to provide an incentive to work.
For help finding a site or if you have additional questions about EITC, call the Office of the Public Advocate at 212-669-7200.
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