News/Events

Tax-return season is well under way in the Natural State and across the country, but with that comes scam artists looking to prey on consumers.

Recently, a number of Arkansans have contacted the Attorney General’s Office to report telephone calls from purported Internal Revenue Service (IRS) agents demanding the consumer share private information in order to receive a refund or to pay taxes immediately to avoid being arrested.

These con artists who have likely altered the caller ID to make it appear that the IRS is calling are posing as IRS agents in an attempt to steal a person’s identity or take their money. Arkansas Attorney General Leslie Rutledge issued today’s consumer alert to remind Arkansans to be cautious and to offer tips to help consumers recognize a scam.

“These scam artists can sound authentic and be very convincing, as well as demanding,” said Attorney General Rutledge. “But even the most sophisticated con artists will raise red flags alerting consumers to scams. Consumers should always remember that no government entity, including the IRS, will ask for your personal financial information through an unsolicited phone call or e-mail.”

The IRS recently reminded consumers how they can easily recognize scammers who call. Consumers should know the IRS will not do the following:

• Call to demand immediate payment or call about taxes owed without first having mailed you a bill.
• Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.
• Require you to use a specific payment method for your taxes, such as a prepaid debit card.
• Ask for credit or debit card numbers over the phone.
• Threaten to contact local police or other law-enforcement groups to have you arrested for not paying.

IRS Commissioner John Koskinen said of these scams: “We have formal processes in place for people with tax issues. The IRS respects taxpayer rights, and these angry, shake-down calls are not how we do business.”

The Attorney General’s office again reminds consumers that the IRS does not use unsolicited e-mail, text messages or any social media to discuss a personal tax issue.

Arkansans who receive a call from someone claiming to be from the IRS or asking for money are encouraged to call the IRS at (800) 829-1040 or the Arkansas Attorney General’s Consumer Protection Division hotline at (800) 482-8982.

Many times what makes Tax Day stressful is the procrastination of waiting to prepare those returns until the day they are due. Consumers should decide now how they will go about preparing tax returns — either prepare their own or seek assistance from a tax-preparation service.

Every year there seem to be more regulations and forms related to tax filing. Some Arkansas consumers may choose to seek assistance with tax preparations rather than crunching numbers and reviewing documents themselves.

Arkansas Attorney General Leslie Rutledge issued today’s consumer alert to encourage Arkansans to plan in advance how they will file their returns and to inform consumers about some of the free tax preparation options available.

“Remember: Nothing prepares us more than being prepared,” said Attorney General Rutledge. “Although some Arkansans file their own taxes without a problem, others may find the tax code to be too complex and tax-preparation services might be a better fit. While some of these services are costly, there are a number of free file programs available that are convenient and easy to use.”

Paying off bills, setting money aside for a future vacation or building up savings are just a few examples of what many consumers plan to do with a tax refund, if they expect to receive one. Few, if any, have carved out plans to give a large portion of the refund right back to a tax preparer or financial institution.

Unfortunately, millions of American taxpayers do exactly that each year when they obtain “rapid” refund products such as Refund Anticipation Checks (RACs) or Bonus Deposit Checks. RACs are essentially high-interest loans which must be repaid by your actual tax return and in many instances are deducted directly from refund proceeds. Thus, consumers are essentially borrowing and paying interest on their own money, and sometimes the refund is less than the loan amount that needs to be repaid.

Arkansas Attorney General Leslie Rutledge issued today’s consumer alert so Arkansans will beware of refund-anticipation products.

“Nobody wants to wait on money that is owed to them and that they know is coming, but I encourage consumers to be wary of promises that are too good to be true,” said Attorney General Rutledge. “Arkansas consumers should exercise patience as they wait on their tax refund to arrive. While the offer of extra cash or an immediate tax refund can be tempting, it should not sway consumers from the risk.”

RAC lending has increased to an estimated 21 million taxpayers in 2013 and 21.6 million in 2014 according to the National Consumer Law Center.

RACs may be offered under other names, such as “instant refund” or “fast refund.” Some include an option for a taxpayers refund to be loaded on a prepaid debit card.

Companies that do offer these or similar products are required to comply with the Arkansas Refund Anticipation Loan Act. The Act, enacted in 2009, requires tax preparers to make some specific disclosures if they offer refund-anticipation product services.

Those tax preparers must prominently display a schedule of fees for the products. They must provide consumers with a printed notice that lists any and all conditions related to the RAC or other products. Also, the preparer is prohibited by law from charging any fees in addition to those assessed by a lender unless the fees are charged to all tax-preparation customers.

Consumers should be cautious if a product offers instant refunds or has add-on fees.

To avoid the high costs associated with refund-anticipation products, consumers should utilize the IRS Free File program. Everyone is eligible to file for free, but taxpayers who earned less than $57,000 in adjusted gross income can file for free using brand-name tax software. The Free File program was available starting Jan. 17, and the IRS begins accepting returns on Jan. 31.

Consumers looking to expedite their refund should consider e-filing. Taxpayers who e-file usually receive their refund within 8 to 21 days and the refund is direct deposited into their bank account. For those without a bank account, the refund can be direct deposited to a prepaid card.