Tax Return form 1040 and dollar banknote, U.S. Individual Income.
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New Report Exposes How Store-Front Tax Preparation Companies Prey on Communities of Color

The report, co-authored by Color of Change and Better IRS, found that storefront tax preparers disproportionately target low-income filers of color

WASHINGTON–For-profit tax preparation companies disproportionately cluster in Black and Brown communities and deploy predatory marketing tactics that take advantage of low-income filers of color, according to a new report out today from Color of Change and the Better IRS campaign.

Of the nearly 150 million tax returns filed with the Internal Revenue Service (IRS) each year, more than half are completed by the $10 billion tax preparation industry. Lacking federal oversight, many of the more than 700,000 tax preparers in the United States are, at best, unqualified and, at worst, purposely taking advantage of taxpayers, committing fraud, and engaging in misconduct.

Building on previous research, the report introduces new data demonstrating that unregulated preparers are most prevalent in low-income, Black and Brown communities. Counties with more Black taxpayers and Earned Income Tax Credit (EITC) claimants have 14 percent more Jackson Hewitt and 7 percent more Liberty Tax locations. Counties with more Hispanic taxpayers and EITC claimants have 11 percent more Liberty Tax locations, 8 percent more Jackson Hewitt locations and 5 percent more H&R Block locations.

The authors go on to argue that policymakers should protect taxpayers by:

  • Regulating the tax preparation industry
  • Defending and expanding the IRS’ Direct File tool
  • Implementing policies that ensure our tax system works for everyone, including investing in the Volunteer Income Tax Assistance for (VITA) program

“Tax preparation companies have been siphoning resources from Black families through the provision of second-rate services at a premium – and, in most cases – unnecessary cost. Policymakers must hold these corporations accountable and protect consumers by raising the standards of this industry, which has made billions off of exploitative business practices for decades,” said Portia Allen-Kyle, chief of staff at Color Of Change. “Our report exposes the alarming reality: predatory tax prep companies disproportionately target Black and Brown communities, exploiting financial vulnerability. It’s time to protect taxpayers.”

In addition to new research, the report also highlights real stories from both former customers and preparers who have experienced firsthand how these companies take advantage of vulnerable taxpayers.

“It is beyond time that policymakers stand with consumers and hold these unscrupulous, shady tax preps accountable for taking advantage of low-income filers of color,” said Igor Volsky, executive director of Groundwork Action and a leader in the Better IRS campaign. “Americans almost unanimously agree that taxpayers should have the option to file their taxes for free without relying on private companies that try to nickel and dime them. The only way we can grow our economy is if we have a tax system that works for all of us.”

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