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Tax preparers prey on low-income filers, study finds

Tax preparers are taking advantage of those who receive Earned Income Tax Credit, according to some researchers. Scott Olson/Getty Images

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A new study says tax preparation companies are taking advantage of low- and moderate-income people who receive the earned income tax credit. The popular program shaves the tax bills of nearly 28 million Americans, but Progressive Policy Institute researchers say an alarming amount of the refund money winds up in the hands of tax preparers.

“Typically, [EITC filers] get about $2,200 dollars,” said Paul Weinstein, who is co-author of the study and director of Johns Hopkins University’s public management program.

The study looked closely at Baltimore and Washington, D.C. and found that tax-prep chains charge EITC filers around $400 on average. Nationally, the study found that areas with high concentrations of EITC filers also have high concentrations of brand-name tax prep branches, about 75 percent more than areas with fewer EITC families.

Various programs, including IRS Free File, provide free tax preparation for low-income Americans.

H&R Block and Liberty Tax Service issued statements strongly disputing the report’s findings, saying clients pay for the convenience and expertise the companies offer. Jackson Hewitt didn’t respond to requests for comment.

 

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