Would you give your Social Security and bank account numbers, employer and most private financial information to a perfect stranger then walk away? Common sense says no, but it happens every day – particularly during tax time.
We don’t trust ourselves to do our own taxes, but as of 2010, the Internal Revenue Service estimated more than 80 percent of Americans turn to professional tax preparers or tax software to help file their taxes. The Better Business Bureau, the IRS and many other consumer advocates strongly caution taxpayers to do their homework about tax professionals before entrusting them with your tax information.
Regardless of who helps you prepare your taxes, it’s still your signature on the bottom line, so you are ultimately responsible. In addition to overpaying for tax services and exposing yourself to tax scam artists, errors that occur from working with a disreputable tax preparer can result in audits, additional fees and more trouble with the IRS.
“This time of year, it seems like everyone wants to help you do your taxes. We see companies that have nothing to do with the financial industry offer to give you an instant refund that you can apply to your car or couch, and consumers need to be wary of these too-good-to-be- true promises,” said Katherine Hutt, a spokesperson for the Better Business Bureau. “You want to make sure that you go to a reputable tax preparer, because if you get audited, you want to be able to go back to that person and ask questions. You can’t do that at a temporary tax service. It’s also a red flag if your tax preparer refuses to sign the return and wants to pretend that you have done it yourself. Tax preparers are legally required to sign all documentation.”
Consumers can search for tax preparation service reviews at the Better Business Bureau at bbb.org.
The Texas Attorney General’s Office oversees the Consumer Protection Division. In early February, Attorney General Gregg Abbott released a statement warning taxpayers about the dangers of fraudulent tax preparers.
“As with any contractual agreement, you should carefully read the fine print before entering into a finan¬cial transaction involving their income taxes. Taxpayers who understand the nature of these agreements are more likely to make informed decisions that just might save some of their hard-earned money,” said Texas Attorney General Greg Abbott. “Tax preparers that submit false information in or¬der to obtain larger refunds for a client (and higher fees for the preparer) put their clients in legal jeopardy. Competent, legitimate tax preparers will not hesitate to sign their cli¬ents’ tax return.”
The IRS recommends the following tips when choosing a tax return preparer:
- Check the preparer’s qualifications. New regulations require all paid tax return preparers to have a Preparer Tax Identification Number. In addition to making sure they have a PTIN, ask if the preparer is affiliated with a professional organization and attends continuing education classes. The IRS is also phasing in a new test requirement to make sure those who are not an enrolled agent, CPA, or attorney have met minimal competency requirements. Those subject to the test will become a Registered Tax Return Preparer once they pass it.
- Check on the preparer’s history. Check to see if the preparer has a questionable history with the Better Business Bureau and check for any disciplinary actions and licensure status through the state boards of accountancy for certified public accountants; the state bar associations for attorneys; and the IRS Office of Enrollment for enrolled agents.
- Ask about their service fees. Avoid preparers who base their fee on a percentage of your refund or those who claim they can obtain larger refunds than other preparers. Also, always make sure any refund due is sent to you or deposited into an account in your name. Under no circumstances should all or part of your refund be directly deposited into a preparer’s bank account.
- Ask if they offer electronic filing. Any paid preparer who prepares and files more than 10 returns for clients must file the returns electronically, unless the client opts to file a paper return. More than 1 billion individual tax returns have been safely and securely processed since the debut of electronic filing in 1990. Make sure your preparer offers IRS e-file.
- Make sure the tax preparer is accessible. Make sure you will be able to contact the tax preparer after the return has been filed, even after the April due date, in case questions arise.
- Provide all records and receipts needed to prepare your return. Reputable preparers will request to see your records and receipts and will ask you multiple questions to determine your total income and your qualifications for expenses, deductions and other items. Do not use a preparer who is willing to electronically file your return before you receive your Form W-2 using your last pay stub. This is against IRS e-file rules.
- Never sign a blank return. Avoid tax preparers that ask you to sign a blank tax form.
- Review the entire return before signing it. Before you sign your tax return, review it and ask questions. Make sure you understand everything and are comfortable with the accuracy of the return before you sign it.
- Make sure the preparer signs the form and includes their PTIN. A paid preparer must sign the return and include their PTIN as required by law. Although the preparer signs the return, you are responsible for the accuracy of every item on your return. The preparer must also give you a copy of the return.
- Report abusive tax preparers to the IRS. You can report abusive tax preparers and suspected tax fraud to the IRS at www.irs.gov or at 800-TAX-FORM (800-829-3676).
–Elise Rambaud Marrion