The City of Chicago has begun its first tax season with the newly passed Income Tax Preparers Ordinance (the “Tax Ordinance”) with strict enforcement. On March 14, 2012, the City passed the Tax Ordinance in an effort to protect consumers from hidden fees. In an effort to enforce this Tax Ordinance, the City has sent officials from the Department of Business Affairs and Consumer Protection undercover posing as consumers. Since the Tax Ordinance requires strict compliance, the City has ticketed tax professionals that are not in full and complete compliance with the Tax Ordinance.
Under the Tax Ordinance, tax professionals are required to provide consumers with two documents. First, tax professionals must provide a “Consumer Bill of Rights Regarding Tax Preparation Services” in English and Spanish. Additionally, tax professionals must provide a “Disclosure Form.”
The “Consumer Bill of Rights Regarding Tax Preparation Services” is prepared by the City and explains consumers’ rights under the Tax Ordinance, including: 1) the right to receive a detailed explanation of the tax preparers services; 2) the right to receive a detailed explanation and estimation of the cost associated with each service; 3) the right to receive an estimation of when the consumer can expect his or her refund; and 4) the right to receive an explanation of alternate settlement products, such as a refund anticipation loan or a refund anticipate check. Both the Spanish and English versions of the Consumer Bill of Rights Regarding Tax Preparation Services can found on its website: http://www.cityofchicago.org/city/en/depts/bacp/supp_info/tax_preparation_servicesbillofrightsforconsumers.html.
The “Disclosure Form” must also be given to consumers before the tax professionals can render tax services. However, the Disclosure Form is prepared by the individual tax professionals. Accordingly, the City requires that each tax preparer’s Disclosure Form is approved annually by Department of Business Affairs & Consumer Protection. The Disclosure Form must contain: 1) a written list, description, and price of the tax preparation services offered; 2) a written list, description and price of all fees associated with each services, including filing fees and processing fees; 3) a written estimate of the total charge to the consumer based on the services the consumer has selected; 4) a written estimate of the period of time the consumer can reasonably expect to wait for his or her refund; and 5) a certification from the tax preparer indicating that the tax preparer has reviewed the disclosure with the consumer. The Disclosure Form must also be in English and Spanish.
Failure to strictly comply with the requirements of Tax Ordinance may result in fines of $250-$750 per offense. In addition, each day a violation continues may constitute a separate offense. Based on the City’s recent undercover operations, it is clear that the Tax Ordinance is a priority. Tax professionals should ensure they are compliant.