More than 150 million individual returns were filed last year and over half of those were prepared by a paid return preparer. Most tax professionals provide honest, high-quality service. However, there are some dishonest preparers who set up shop each filing season to perpetrate refund fraud, identity theft and other scams that hurt taxpayers.
"Choose your tax return preparer carefully because you entrust them with your private financial information that needs to be protected," said IRS Commissioner John Koskinen. "Most preparers provide high-quality service but we run across cases each year where unscrupulous preparers steal from their clients and misfile their taxes."
Illegal scams can lead to significant penalties, interest or possible criminal prosecution. IRS Criminal Investigation works closely with the Department of Justice (DOJ) to shutdown scams and prosecute the criminals behind them.
Choose a Return Preparer Carefully
It is important to choose carefully when hiring an individual or firm to prepare a tax return. Well-intentioned taxpayers can be misled by preparers who don’t understand taxes or who mislead people into taking credits or deductions to increase their fee. Every year, these types of tax preparers face everything from penalties to jail time for defrauding their clients.
Here are a few tips when choosing a tax preparer:
- Ask if the preparer has an IRS Preparer Tax Identification Number (PTIN). Paid tax return preparers are required to register with the IRS, have a PTIN and include it on tax returns.
- Inquire whether the tax return preparer has a professional credential (Enrolled Agent, Certified Public Accountant or Attorney), belongs to a professional organization or attends continuing education classes. Tax law changes can be incredibly complex and a competent tax professional needs to be up-to-date in these matters. Always check the preparer’s qualifications!
- Check the preparer’s history for disciplinary actions and the license status for credentialed preparers. For Enrolled Agents, go to IRS.gov and search for “verify enrolled agent status” or check the Directory. For CPAs, check with your State Board of Accountancy. For attorneys, check with your State Bar Association.
- Ask about service fees. Avoid preparers who base fees on a percentage of their client’s refund or boast bigger refunds than their competition. Don’t give your tax documents, SSNs and other information to a preparer when only inquiring about their services and fees. Unfortunately, some preparers have improperly filed returns without the taxpayer’s permission once the records were obtained.
- Ask to e-file your return. Make sure your preparer offers IRS e-file. Paid preparers who do taxes for more than 10 clients generally must file electronically. The IRS has processed more than 1.5 billion e-filed tax returns. It’s the safest and most accurate way to file a return.
- Provide records and receipts. Good preparers will ask to see your records and receipts. They’ll ask questions to determine your total income, deductions, tax credits and other items. Do not rely on a preparer who is willing to e-file your return using your last pay stub instead of your Form W-2. This is against IRS e-file rules.
- Make sure the preparer is available. In the event questions come up about your tax return, you may need to contact your preparer after the return is filed. Avoid fly-by-night preparers.
- Understand who can represent you. Attorneys, CPAs, and Enrolled Agents can represent any client before the IRS in any situation. Annual Filing Season Program participants may represent you in limited situations if they prepared and signed your return. However, non-credentialed preparers who do not participate in the Annual Filing Season Program may only represent clients before the IRS on returns they prepared and signed on or before Dec. 31, 2015.
- Never sign a blank return. It’s a clear red flag when a taxpayer is asked to sign a blank tax return as the preparer can put anything they want on the return — even their own bank account number for the tax refund. Never use a tax preparer that asks you to sign an incomplete or blank tax form.
- Review your return before signing. Before you sign your tax return, review it and ask questions if something is not clear. Make sure you’re comfortable with the accuracy of the return before you sign it and that your refund goes directly to you – not into the preparer’s bank account. Reviewing the routing and bank account number on the completed return is always a good idea.
- Select an ethical preparer. Taxpayers entrust vital personal data with the person preparing their tax return, including income, investments and Social Security numbers. Selecting someone you trust will abide by all local, state and federal laws is very important as any illegal or “questionable” actions could result in delays, fines or worse!
- Report abusive tax preparers to the IRS. You can report abusive tax return preparers and suspected tax fraud to the IRS. Use Form 14157, Complaint: Tax Return Preparer. If you suspect a return preparer filed or changed the return without your consent, you should also file Form 14157-A, Return Preparer Fraud or Misconduct Affidavit. You can get these forms on IRS.gov.
William D. Truax and his friendly team of EAs and licensed tax preparers have been representing individuals and businesses across the country for over 30 years. They understand how important finding the right tax professional is and offer a full spectrum of financial services to help make the decision a little easier including:
- Tax Planning and Preparation
- IRS and state Representation
- Accounting Services
- Payroll and Business Management
- Financial Statements
- Trust & Estate Taxes
In addition, Mr. Truax is a member of the Bar of the United States Tax Court – a privilege very few EAs are granted. He is also a fellow and Accredited Tax Advisor of the National Association of Tax Professionals and a member of the National Association of Enrolled Agents.
For more information, please visit www.truax.net or click below to schedule a free consultation today!