The Internal Revenue Service
today warned taxpayers to be on the lookout for unscrupulous return preparers,
one of the most common “Dirty Dozen” tax scams seen during tax season.
The vast majority of tax
professionals provide honest, high-quality service. But there are some
dishonest preparers who set up shop each filing season to perpetrate refund
fraud, identity theft and other scams that hurt taxpayers. That's why
unscrupulous preparers who prey on unsuspecting taxpayers with outlandish
promises of overly large refunds make the Dirty Dozen list every year.
"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."
Return preparers are a vital
part of the U.S. tax system. About 60 percent of taxpayers use tax
professionals to prepare their returns.
Illegal scams can lead to
significant penalties and interest and possible criminal prosecution. IRS
Criminal Investigation works closely with the Department of Justice (DOJ) to
shutdown scams and prosecute the criminals behind them.
Choosing Return
Preparers 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 they aren’t
entitled to in order 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. A number of tax law changes can be complex. A competent
tax professional needs to be up-to-date in these matters. Tax return
preparers aren’t required to have a professional credential. The IRS
website has more information regarding the national
tax professional organizations.
- Check the preparer’s qualifications. Use the IRS Directory of Federal Tax Return Preparers with
Credentials and Select Qualifications. This tool can help locate a tax
return preparer with the preferred qualifications
- The Directory is a searchable and sortable listing of
certain preparers registered with the IRS. It includes the name, city,
state and zip code of:
- Attorneys
- CPAs
- Enrolled Agents
- Enrolled Retirement Plan Agents
- Enrolled Actuaries
- Annual Filing Season Program
participants
- Check the preparer’s history. Ask the Better Business
Bureau about the preparer. Check for disciplinary actions and the license
status for credentialed preparers. For CPAs, check with the State Board of
Accountancy. For attorneys, check with the State Bar Association. For
Enrolled Agents, go to IRS.gov and search for “verify
enrolled agent status” or check the Directory.
- 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. 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 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.
- 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.
To find other
tips about choosing a preparer, understanding the differences in credentials
and qualifications, researching the IRS preparer directory, and learning how to
submit a complaint regarding a tax return preparer, visit www.irs.gov/chooseataxpro.
Remember:
Taxpayers are legally responsible for what is on their tax return even if
someone else prepares it. Make sure the preparer you hire is up to the task.
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