On this one mile stretch of central Brooklyn, within the neighborhoods of Crown Heights and Bed-Stuy, there are nine dollar stores, 11 hair salons, and 12 tax preparation sites.
Teresa Butler-Stokley is filing her taxes today. She tells me she's way too familiar with feeling taken advantage of around tax time. For 15 years, she filed with one of the major chains, and she usually paid between $400 and $500.
She was working a low-paying healthcare job and raising three kids. By the time tax season rolled around, Butler-Stokley often really needed that refund money, usually a few thousand dollars. So she'd pay extra to make sure she got it quickly.
“It doesn't feel good,” she remembers, “because you're looking at the amount that you would have had and then you're looking at the amount that they're gonna charge you. And it's like, 'I know I need this money now, let me just do it.'”
Butler-Stokley says she wasn't stupid, she knew she was throwing away money. But when it felt like she was choosing between getting behind on bills, or coughing up a few hundred extra dollars to get her refund quickly, she'd rather cough up the money and keep the bill collectors away.
For low-income households, tax refunds can be the biggest check they'll receive all year. And eagerness for that check can make people especially vulnerable to large service fees and predatory lending practices.
“When you have low income families, and they're getting a big chunk of money,” says Chi Chi Wu, a lawyer with the National Consumer Law Center, “what I like to say is the sharks come circling in. All these businesses have sprung up to take advantage of the fact that these families who are normally cash-strapped during the year have this sudden influx of funds.”
One way businesses do this is by offering something called a Refund Anticipation Check. Refund Anticipation Loans — loans on your whole refund — are now mostly banned. What the companies do instead is offer you a loan on the tax prep fee. For about 70 extra bucks, you can avoid fronting the fees. In fact, you don't even have to know how much they're going to be. The preparer just takes them out of your refund once it comes through.
“What's happening,” says Wu, “is if you're paying for something out of a bigger chunk of money, you're less sensitive to the price. You know if you're getting $4,000. Having $500 deducted many not hurt as much as reaching into your wallet and pulling out $500.”
“That is the industry standard,” tax shop owner Haziq Inayat says of these high, often hidden, fees. “They all charge the same way because the market bears it.” He worked for a major preparer chain in the past and hadn't felt good about how they did business. So two years ago he opened up his own shop in Crown Heights.
“The tax refund kind of has this mythology behind it,” he says. “Like, 'Yo, this guy hooked me up with like $5K, he did great work for me, you gotta go to him, and you know, he'll hook you up too.'” He says it's like tax preparers have built themselves up to be magicians. Give them your money, and poof, they'll make more money suddenly appear.
A few blocks away from the other tax prep shops I meet German Tejeda of the Food Bank of New York City at a free, volunteer-operated, tax preparation site. The Food Bank runs a number of these throughout the city.
“This site serves about 3,000-4,000 tax filers each year,” he tells me. The city has the capacity to help everyone making under $60,000 get their taxes done for free, he says.
This site is where Teresa Butler-Stokley's getting her taxes done. She found out about this place three years ago.
“I was in a shelter at the time,” she says, “and they explained to me that you could get your taxes done for free, and that's what aided me getting out of the shelter. It was amazing.”
Tejeda beams as Butler-Stokely tells her story. The tax refund, he said, can be a major force for good in people's lives. It's just a matter of making sure that money goes to the person it's meant for.