Jan. 30, 2015
WASHINGTON, DC – The Asset Building Program at New America released a report today, Earned Income Tax Credit (EITC) Awareness Day, that calls for adoption of a “Schumer box” to help bring transparency to what is an opaque and unpredictable market for commercial tax preparation services. The report, “Improving the Tax Preparation Experience” analyses the lack of price transparency and frequency of fraud on the part of commercial tax preparers and calls for a variety of reforms. The “Schumer Box” is a customary feature of credit applications that makes clear to the customer any expected fees or estimates of costs. Adding such a disclosure to the process of purchasing tax preparation services should help restore a fair marketplace for tax preparation services and allow hardworking taxpayers to keep more of their earned tax refunds and credits and better build assets and financial security.
David Rothstein, a research fellow in the Asset Building Program and author of the report said, “A ‘Schumer Box’ has proven to be an effective tool for providing disclosure with other financial products. We should apply that success to tax preparation services.” Rothstein added, “However, that is not enough, to crack down on persistent fraud we need greater licensing and regulation of paid preparers. “
The report further calls for clear authority for the IRS to require licensing and education of paid preparers. The complexity of the tax code, and the proliferation of valuable tax credits like the EITC have combined to create a massive demand for tax preparation services. In 2013, more than 15 million EITC-eligible households spent at least $990 million on tax preparation fees. Those fees undermine the earned benefits delivered to those families via the EITC and undermine the ability of those families to save and build assets. Moreover, fees for tax preparation from unregulated providers are opaque, unpredictable and often inflated to account for low-value or no-value add-ons like Refund Anticipation Checks (RACs).
“If families are paying upward of $500 to receive tax assistance and additional dollars to get their refunds put on debit cards – they are losing the supports they’ve earned through their hard work, losing the ability to save, and taxpayer dollars are being wasted,” Rothstein said, “Tax preparation services are a failed market. Consumers should easily be able to obtain a good faith estimate of the price they’ll pay before, not after, their return is prepared.”
The report, co-authored with the Asset Building Program’s Rachel Black includes a model disclosure form and is available here.
Research Fellow, Asset Building Program
Media Relations Associate, New America