The material presented here is for educational purposes only, and is not intended to be used as financial, investment, or legal advice.
It’s Tax Fraud Season! Is Your Tax Preparer Trustworthy?
Tax preparation services, like Intuit’s TurboTax software, make it easy to file your taxes online and at no cost. However, for more complicated taxes, you may need the professional help of a tax preparer.
IRS statistics show that 60% of tax returns are prepared by tax professionals. Unfortunately, deceptive “professionals” may be out to defraud you too. In 2018, there were 38,967 reports of tax fraud — and tax fraud ranked in the top three for types of identity theft. That’s why it’s important to be aware of the following, so you can feel comfortable knowing that you’re hiring a tax professional who’s reputable and honest.
How to Find a Trustworthy Tax Professional
Research credentialed accountants such as a certified public accountant (CPA), enrolled agent (EA) or attorney. CPA Practice Advisors gives these tips to help you find a tax practitioner who’s qualified:
- Ask to see a preparer tax identification number (PTIN)
- Check their background:
- CPAs: State Board of Accountancy
- EA: IRS Office of Enrollment
- Attorney: State Bar Association
- Or completed the Annual Filing Season program
Review the IRS’s “Understanding Tax Return Preparer Credentials and Qualifications” to learn more about the credentials, qualifications and representation rights of different types of legitimate practitioners. Keep in mind, a financial advisor who’s a certified financial planner (CFP) is also a great resource for tax return preparation, tax planning and providing tax advice/resolution.
Can You Trust Your Tax Preparer? Awareness is Key!
By simply reading this article, you’re taking the first step in preventing tax fraud or identity theft from happening to you. Now that you know what qualifications to look for in a professional preparer, use the following checklist to safeguard your personal information and money, as you file your state and federal tax returns:
Signs of an Unscrupulous Tax Preparer
- Claims they can get you a large tax refund or promises inflated refunds compared to competitors
- Bases fees on a percentage of the refund
- Offers to deposit all or a portion of your refund into their financial accounts
- Acts demanding, threatening, hostile or intimidating
- Falsely overstates deductions, invents income or improperly claims credits or benefits
- Encourages an advanced “refund anticipation loan” — which charges additional fees and high interest rates; you’re still required to pay back the entire amount, even if your refund is smaller than anticipated
Signs of a Trustworthy Tax Preparer
- Enters their PTIN on the return, signs the return and gives you a free copy
- Asks for records, receipts and supporting documents, and files using your Form W-2
- Willing to answer questions such as:
- How are errors, exams or audits handled?
- How many times have your clients been audited or owed more than expected?
- Do you specialize in my specific tax situation and understand the requirements?
- Are you up-to-date on tax reform changes and seek continuing education?
- Provides their contact information and is reachable after tax season
- Serves as a member of a professional organization: The National Association of Tax Professionals, National Association of Enrolled Agents, American Institute of Certified Public Accounts or American Academy of Attorney CPAs
More Taxpaying Good-To-Knows
- Never sign a blank form.
- Review every item reported on your return for accuracy and errors (this is your responsibility).
- Stop contact with anyone who claims to be an IRS agent from the Taxpayer Advocate Service (TAS) threatening to arrest or deport you, or revoke a license, if you don’t provide: your personal info, social security number, individual taxpayer identification number (ITIN) and/or immediate payment of any form (e.g. gift card, prepaid debit card, wire transfer); the IRS will never contact you by phone, email, text or social media.
- The IRS initially sends several letters/written notices via mail to communicate any issues.
- Emails about your refund from the Taxpayer Advocacy Panel (TAP) are a phishing scam; TAP is volunteer board and would never request your financial or personal information.
- File your taxes as soon as possible to help eliminate the risk of someone fraudulently filing your return before you.
- Search for scams reports using the BBB Scam Tracker.
If you suspect you’re a victim of tax fraud and need to report it, refer to “Tax Scams – How to Report Them” and “How Do You Report Suspected Tax Fraud Activity” provided by the IRS. Stay informed and vigilant to ensure your information and tax returns never fall into the wrong hands!