Competition to process tax returns pushes some preparers to less scrupulous methods, among them promise of large refunds. There wouldn’t be anything wrong with that except for the fact that they are willing to misrepresent taxpayer’s information to generate inflated refunds. Providing false information is illegal and may carry financial penalty or prison term.
What are some warning signs that indicate you may be dealing with a dishonest tax preparer?
- Tax preparers should always give you a copy of your tax return; a respected tax professional should walk you through the return and explain main points – that includes information on how much your refund is; scammers often don’t provide a copy of a tax return.
- Refund should always go directly to you, either mailed to the address you provide or deposited into your bank account; scammers often want the refund be deposited in their accounts; there are no reason for the refund to go to your tax preparer first.
- Never sign an unfinished tax return; tax preparer should always sign the tax return prepared for you and enter their tax identification number.
- Fee to have your taxes prepared should not be tied to the amount of refund you receive; tax preparation fee should only be linked to the complexity of your tax return and you can inquire about that before your tax return is completed; scammers often want to have your refund deposited in their accounts, charge a hefty fee and pay you the remainder.
Remember, that even though you are not preparing the tax returns, you are ultimately responsible for the document submitted to the IRS.
This type of taxpayer abuse is nothing new. The IRS has included it on its Dirty Dozen list of scams for multiple years in a row. If you are trying new tax service for the first time and have some doubts, here are some tools you can try to investigate a tax preparer:
- Qualified Tax Preparer – this portion of the IRS website is a directory of tax preparers with credentials recognized by the IRS; it typically includes Attorneys, Certified Public Accountants, Enrolled Agents; they also participate in ongoing continues education programs.
- Annual Filing Season Program Participant – you can search the same website for tax preparers who aren’t those listed above, but are recognized by the IRS for participating in continuing education in preparation for a particular tax season.