City leaders eyeing law to crackdown on shady tax preparers

MEMPHIS, Tenn. -- Every year the News Channel 3 Investigators hear from customers who've had bad experiences with tax preparers.

Complaints range from high fees and unsigned paperwork, to preparers filing without the customer's permission.

So, the problems Erika Roberts says she experienced with Tax Pros are familiar.

"I still haven't gotten written information of how much my fees were," Roberts told WREG in early March after more than $1200 was deducted from her refund.

WREG has interviewed dozens of taxpayers with similar complaints about various companies.

In 2012, Memphis based Mo' Money Taxes made national headlines for problems with refunds. That was followed by an IRS raid, a congressional hearing and an eventual shutdown through an injunction from the U.S. Department of Justice.

"We had issues that pretty much got national attention," said Memphis City Council Chairman Berlin Boyd.

After WREG's latest investigation into Tax Pros and customer complaints, the News Channel 3 Investigators researched what other cities and states were doing in regard to standards for tax prep firms and protections for taxpayers.

Four states (California, Maryland, New York, Oregon) have mandatory standards for paid preparers who aren't CPAs, lawyers or enrolled agents, such a licensing or registration.

New York and Chicago, have local laws that resulted in the creation of a Consumer Bill of Rights for Taxpayers.

WREG shared that information with Boyd.

"After you bringing that information to me, I started working at it and researching it myself to see exactly what direction the city of Memphis could take."

At its most recent meeting, the Memphis City Council passed a resolution sponsored by Chairman Boyd.

It's a warning, urging Memphians to use caution and choose a preparer wisely.

Boyd explains, "It serves notice to consumers. Make sure you look at the individuals that you go to visit that are preparing for taxes."

Read the Resolution

The laws in Chicago and New York require tax preparers to disclose details about services and fees.

In Chicago, customers must get a written estimate and contract before a preparer can even start working on their taxes.

Paid preparers in New York have to post visible signs with their fees.

In both cities, taxpayers can use a hotline to file preparer complaints.

Boyd says this resolution is a start.

"This is the framework for me to continue to move forward to see if we can go and start creating organizations within city government to protect consumers from these predatory tax companies in the city of Memphis."

Click here to read about IRS requirements for paid preparers and to search for a paid preparer in your area or file a complaint.

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