Low-income Americans spend as much as $400 to get tax refund, report finds

Jana Kasperkevic in New York
Thursday 14 April 2016 05.00 BST

Low-income Americans are falling prey to paid tax preparers, according to a new report published by the Progressive Policy Institute.

The authors found that large tax preparer chains were taking 13% to 22% of low-wage workers’ tax refunds and that tax preparation chains were targeting low-income areas that have a high number of people eligible for the earned income tax credit (EITC), a benefit for working people with low to moderate income.

On average, workers eligible for EITC spent about $400 to get their taxes done. A 2002 study found that low-wage workers spent about $1.75bn of the earned income tax credit refund on tax preparations.

“The stiff fees charged by large chain preparers can quickly erode an EITC refund, weakening a safety net provided by US taxpayers for our most vulnerable workers,” Paul Weinstein, director of Johns Hopkins University’s graduate program in public management, and Bethany Patten, a policy and research manager at Excellent Schools Detroit, wrote in the report. “Congress did not intend that tax credits be used to pad the bottom line of private tax service vendors.”

Often, the EITC paperwork means additional fees. In Baltimore, H&R block charged about $309 and Liberty tax services charged as much as $509 for a complete return, according to the report. In Washington DC, those filing for EITC would pay $315 at H&R Block and about $491 at Jackson Hewitt.

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