Paying Fees To Get Your Tax Refund? Don't Make These Mistakes

NJ.com — April 9, 2019

By Karin Price Mueller | NJ Advance Media for NJ.com

There's no such thing as a free lunch.

Maybe, but it's not true when it comes to your tax return. Rather than pay hundreds of dollars or more to a for-profit tax preparation company, many consumers are eligible to get their taxes done for free.

Winston George of Irvington found out the hard way.

He went to a Jackson Hewitt tax prep firm in his hometown to complete his 2018 tax returns. He paid $211 for the returns, and another $49.95 - a fee he thought was to have his state and federal refunds put on a prepaid refund card, the American Express Serve card.

George said he takes no issue with the tax prep fees, but he said he was misled about the card.

"I asked them how will I get the refund and they said I can pick up a check or take the card," he said. "They said it would be $49.95 for me to use the card."

Rather than taking time off from work to pick up his refund checks, he opted for the card.

But his decision was based on incorrect information. George wouldn't have had to return to Jackson Hewitt to get his refund checks, but instead, they would have been mailed directly to his home or direct deposited into his bank account.

Plus, he said, his Jackson Hewitt rep said he could only take money off the card without fees at ATMs found at 7-11 locations. That also wasn't accurate. The fee-free transactions can also take place at CVS or Walmart stores. Otherwise, there would be a $3.50 fee per transaction.

But then we learned the card itself was actually free. So what was the $49.95 charge for?

George had no idea about the misinformation until he learned about free tax return services provided by New Jersey Citizen Action (NJCA), a nonprofit that among other things, provides free tax preparation services.

At NJCA, he learned his tax returns could have been completed for free and that he could have had the refund sent to his bank account rather than to the card.

While Jackson Hewitt prepared George's returns correctly, NJCA took issue with other items.

"The only document he was given was a summary form. There was no copy of an actual return," said Naomi Anderson, director of the nonprofit's tax efforts. "There were no details about his options for the refund."

What's out there

Jackson Hewitt isn't the only tax prep chain that offers refund cards.

H&R Block offers the option to have your refund put on an Amazon gift card, and it adds a 5 percent bonus to the refund amount. The maximum refund amount you can put on the card is $5,000. These cards, though, have no fees, though you have to pay for certain services to be eligible.

Liberty Tax offers a Netspend prepaid MasterCard. We asked the company about the offer - specifically what kinds of fees consumers can expect - but it didn't respond in time for publication.

The Liberty Tax website simply says: "Additional fees may apply."

Why would anyone want a card instead of the cash? They may be attractive to taxpayers who don't have a bank account.

"They are marketed as an opportunity to avoid check cashing fees," said Leila Amirhamzeh, NJCA's director of development. "What consumers don't know is while they might think they're avoiding check cashing fees, there may be fees for ATM withdrawal, monthly fees to have the card every month, and then stipulations for how an individual can access that money."

We reached out to Jackson Hewitt about George's experience, and shortly thereafter, George got a call from a Jackson Hewitt representative.

"He said the fee was for processing so I wouldn't have to pay the tax preparation fee upfront but it would be taken from the refund," George said he was told. "But nobody told me the fee was for that. They said it was for the card. And they didn't give me the option to pay the $211 right then. My bank is right across the street."

But, the rep apologized, and said the company would return George's $49.95.

We asked Jackson Hewitt to explain the mishap, but it didn't offer much illumination.

"Jackson Hewitt is committed to 100 percent client satisfaction and we work with various financial partners to offer optional products and services," a spokeswoman said. "We want to ensure transparency and we're pleased that any miscommunication with the client about the optional products and services has been resolved to their satisfaction."

George was happy to get his $49.95 back, but he said he wasn't exactly satisfied. He said he's absolutely positive he was told the fee was to put his refund on the card. That it was not a miscommunication on his part, but instead, he was told wrong information.

"They took my money under false pretenses," he said. "They told me the $49.95 was to get the card, not to use my refund to pay the $211. We had already decided that the refund would pay for the tax preparation fees before they ever mentioned the card."

"Had you and Citizen Action not stepped up, if you hadn't approached them, they never would have considered giving it back to me," George said.

Getting tax prep for free

New Jersey Citizen Action is one of hundreds of free tax prep services in New Jersey.

NJCA completed nearly 6,000 free tax returns at its location on Halsey Street in Newark last year. It expects to do even more this year, it said.

"We want people to avoid scams and frauds, in addition to high fees that happen at for-profit tax centers," said Phyllis Salowe-Kaye, executive director of NJCA.

NJCA, and other groups like it, offer the free services as part of the IRS Volunteer Income Tax Assistance (VITA) program. It generally helps taxpayers who earn $55,000 or less, or those with disabilities or limited English language skills, according to the IRS website.

There's also a service for seniors called the Tax Counseling for the Elderly (TCE) program, mostly run through AARP. This service focuses on "those who are 60 years of age and older, specializing in questions about pensions and retirement-related issues unique to seniors."

Last year, AARP Foundation Tax-Aide had 152 sites across New Jersey with more than 1,000 volunteers, and it filed more than 80,000 free federal and state returns, the group said.

According to the IRS, there are 272 VITA and TCE sites in New Jersey this year.

To see if you qualify for these free services, check out this IRS publication.

To find a VITA site near you, use the IRS VITA locator tool or call (800) 906-9887.

To find an TCE program run by the AARP Foundation's Tax-Aide program, click here or call (888) 227-7669.

And finally, you can learn more about New Jersey Citizen Action's free tax prep services here, or call (973) 273-0315 to make an appointment.

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