Mayor Emanuel announced the results of his citywide investigation on tax preparation businesses yesterday, City inspectors found 65 percent of tax preparation businesses did not meet the standards of the City ordinance regulating tax preparation services. The investigation, conducted by the City of Chicago Department of Business Affairs and Consumer Protection, paid a visit to 409 known tax preparers which lead to four businesses receiving cease and desist orders; 13 received notices to correct their (limited business license) licensing; 334 Administrative Notices of Violations (ANOVs) were issued to 147 businesses that will have to appear at administrative hearings. Violations ranged from operating illegally or without state of Illinois approval; operating without any license, to failing to provide a consumer bill of rights and failure to provide written disclosure. Fines for each violation can range from $50 to $10,000 per offense. There is the potential for $94,600 to $340,750 in fines based on the ANOVs issued.
According to BACP Commissioner Maria Guerra Lapacek investigations will continue in order to protect consumers from predatory practices; any unlicensed businesses will be shut down and action will be taken against businesses that don’t follow the City ordinance. In order for tax preparation service providers to operate in the City, the City mandates that tax preparers inform taxpayers of their rights and disclose any hidden fees, eliminate surprise costs and hard to find fine print during tax preparation, while the BACP mandates businesses to use easy-to-understand disclosure forms that clearly lay out all costs before the return is prepared.
Because Chicagoans could receive up to $6,750 from the federal and state Earned Income Tax Credits businesses being targeted under the ordinance violations will also be checked that they are not preying on taxpayers eligible for the Earned-Income Tax Credit (EITC). Each year, approximately 100,000 eligible households in the City do not claim the EITC, leaving as much as $200 million in unclaimed dollars that could help individuals provide for themselves and their families. Because it has been found that predatory commercial tax preparers use misleading practices and fine print to drive consumers into costly and unnecessary refund products, businesses will be checked for signs that they are not forcing customers to use a Refund Anticipation Loan or a Refund Anticipation Check (RALs/RACs) when they seek general tax returns services.