Beware of Unscrupulous Tax Return Preparers

It is after the holiday season, and your funds are running low. You receive your W-2s from your job and other tax documents, and you are ready to file your tax returns so that you can get some relief for your household budget. Plus, there’s this new gadget that you have had your eye on that nobody got you for Christmas. Valentine’s Day is coming up, and you still have not gotten your sweetie a present yet. Wait! You remember seeing a sign down the street for this tax office that promises to get you back at least $5,000 and that you will have your money within 3 days. In your mind they have signs out front, are in a building, and come to the same spot each year. Well, you think that’s the same company that shows up each year. They have to be legit, right? You begin to gather your things to head to that tax office to get the $5,000 that they promise.

Many taxpayers similar to the one in the scenario above face this issue year after year. Matter of fact, the Internal Revenue Service (IRS) states that 60 percent of taxpayers use tax professionals to prepare their returns each year. With the increased volume of identity theft issues and tax scams, it is more important than ever that taxpayers use reputable and honest professionals to give their personal information to during the tax preparation process.

Return Preparer Fraud continues to reside on the IRS’s “Dirty Dozen” list of Tax Scams to Avoid this year. To aid taxpayers in avoiding the unscrupulous tax preparers that steal from their clients and misfile their returns, the IRS has provided a list of tips that taxpayers should use when choosing a tax preparer. Here are a few of those tips:

• 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 your filed tax return.
• Ask about service fees.  Preparers are not allowed to base fees on a percentage of their client’s refund. Also avoid those who boast bigger refunds than their competition. Make sure that your refund goes directly to you – not into your preparer’s bank account.
• 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 offer electronic filing. 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. Non-credentialed tax return preparers can represent clients before the IRS in only limited situations, depending upon when the tax return was prepared and signed.  For all returns prepared and signed after Dec. 31, 2015, a non-credentialed tax return preparer can represent clients before the IRS in limited situations only if the preparer is a participant in the IRS Annual Filing Season Program
• Never sign a blank return.  Don’t 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.
• Report tax preparer misconduct to the IRS. You can report improper activities by 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.

Here's a video from the IRS on how to choose a tax preparer. 

If you suspect that a tax preparer has committed fraud or violated the rules in some other way, learn how to submit a complaint here. Good luck this season!

It’s Tax Time Again Everyone!

Wait! 

Did somebody say taxes? 

While some people may moan and groan about the 2016 Tax Season that is just under way as of January 19th (likely the tax professionals such as myself that can mainly look forward to lots of late nights and communications with clients), most of the country cannot wait to file their taxes in anticipation of tax refunds. Per IR-2016-05 posted on The Internal Revenue Service (IRS) website last week, “The IRS expects more than 70 percent of taxpayers to again receive tax refunds this year. Last year, the IRS issued 109 million refunds, with an average refund of $2,797.” For those individuals that consider themselves savvy enough to accurately prepare their own taxes without leaving money on the table in the form of missing deductions, the IRS offers brand-name software through some of their commercial partners to about 100 million individuals and families with incomes of $62,000 or less to file their taxes for free using their Free File Program.

Although they may be anticipating tax refunds, many taxpayers still dread this time of the year, especially if they have not been diligent throughout the tax year keeping their receipts and other tax documents organized. Such filers will likely be claiming itemized deductions in the form of mortgage interest, real estate taxes, charitable deductions, casualty and losses, and the biggest time consumers of all, business and rental income. The associated tax forms for these types of items can get pretty complicated, so it is best that people seek out assistance from a trusted tax advisor that is well-versed in the tax laws and one that stays on top of the many changes that occur throughout the year. This area alone can cost you several hundred dollars in missed deductions if you are not careful. Also, when in doubt, seek a second opinion. Most information can be found on the IRS website if you know where to look. I would advise against doing generic online web searches that do not point you to specific documentation on the IRS website or a specific section of the tax code. Random information that you find on a blog or tax website will not hold up in the U.S. Tax Court if called into question, so tread lightly.

The best news of all for those looking to wait until the last possible day to pay any outstanding tax balances or that seek to turn over every rock to find additional deductions, is that you have THREE additional days before your tax return is due. That’s right! The filing deadline is April 18, 2016 because of the Emancipation Day holiday in Washington, D.C. Even better news for taxpayers in Maine and Massachusetts is that Patriot’s Day gives them an extra day to file, making their deadline April 19^th. 

Don’t you just love “the little gifts” like that?   :-)