Dec 17—Tax preparation service providers in Albuquerque must now operate by a new set of rules.
Mayor Tim Keller on Friday signed the “Tax Preparer Ordinance” aimed at protecting consumers who pay someone else to complete their income taxes.
If it sounds familiar, that’s because it is.
The 2022 Tax Preparer Ordinance — which the City Council unanimously approved earlier this month — comes nearly two years after the city first enacted a similar law, but a year after the council put it on ice, citing “certain deficiencies and ambiguities.”
This version, however, garnered support across the spectrum; representatives from the tax prep industry and those from nonprofits that serve vulnerable populations all urged its passage during the Dec. 5 City Council meeting.
“This is one of those really rare places where after a lot of cajoling and meeting and back-and-forth arguing, the advocates and the industry have come to an agreement on something,” Councilor Pat Davis, the ordinance’s sponsor, said before the council’s vote.
The new version notably excludes a previous provision that required tax preparers to alert clients that they may be able to file federal taxes for free through the Internal Revenue Service’s website or get free tax help from a nonprofit organization. Mari Kempton, the city’s consumer protection manager, said the updated version also addressed tax industry complaints about “clunky” and “burdensome” requirements in the first bill.
The law applies to people who prepare taxes for compensation without being a licensed attorney, certified public accountant, tax assistance program volunteer/employee or meeting certain other criteria. Kempton estimates it will affect at least 180 local tax preparers.
The ordinance requires them to tell clients up front and in writing about their education or tax prep-related training; provide a list of fees for each type of service, including the charges associated with “refund anticipation” checks or loans; and describe if fees are calculated per form, per hour or some other way. Before clients have to pay, a preparer must provide a written statement of all amounts being charged. All disclosures must be available in English and Spanish.
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The ordinance also stipulates that clients have a right to have any tax refund deposited directly into their own bank account or sent to them via check. Kempton said some have in the past created special bank accounts for clients’ refunds, which can lead to additional administrative fees for the consumer.
She said the city’s Consumer Financial Protection Initiative identified tax preparation as a key concern after holding community roundtables a few years ago, which made it worth pursuing even after some hiccups with the first version.
“Who it will actually impact are the people trying to hide their fees or tack on fees on the back end,” she said. “Now they’ll have to disclose (information) up front so people can shop.”
Violations are subject to a fine up to $250 for the first offense and $500 thereafter.
The new rules take effect Jan 1.
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