According to the IRS, one of the most common of the “Dirty Dozen” tax season scams is “return preparer fraud” where unscrupulous tax return preparers take advantage of their positions to convince taxpayers into filing incorrect or fraudulent returns claiming unlawful credits or deductions to increase their fees. For an honest taxpayer, this is an easy way to get in a lot more trouble.
You may think that using a well-known name protects against these kinds of problems, but this has not proven to be the case. As recently reported at Forbes.com, franchisees of Liberty Tax Service in South Carolina and Maryland were shut down earlier this year by federal and state authorities due to alleged malfeasance stemming from falsified returns. Unfortunately, these problems have hit Tennesseans even closer to home. A Memphis-based tax preparation chain’s woes continued in August 2015 with federal indictments for preparing false tax returns against the operators of three of the chain’s locations. More recently, in January 2016, a Davidson County tax preparer pled guilty to multiple counts of sales tax evasion and a count of impersonating a licensed professional, among other offenses.
So, what’s an honest taxpayer to do? The IRS and Tennessee’s Consumer Affairs Division have an extensive list of suggestions, but here are a few that I think stand out.
1. Check the tax preparer’s credentials. If he’s a CPA, attorney, or enrolled agent, verify his credential (see below). If he’s not, ask him why you should use him instead of someone who is.
2. Ask if she has a PTIN. It’s a number assigned by the IRS to all registered tax return preparers. If she doesn’t have one, she’s not registered with IRS, and you should find someone else.
3. Ask about the tax return preparation and filing process. You want a preparer who does all of the following:
- Upon request, explains or estimates your fee in advance. The fee should not be based on the amount of your refund.
- Makes you provide Forms W-2 and/or 1099s and other records to support your tax return.
- Marks your refund (if any) to be mailed to you or direct-deposited into your account (not his).
- Electronically files your return after you have reviewed it and signed an authorization form.
- Will be available for contact after your return is filed and after April 15.
If your preparer doesn’t meet all of these criteria, find someone else. There are plenty of competent CPAs, attorneys, and enrolled agents available to prepare your tax returns, and there’s no reason to settle for less.
To verify credentials:
- Search for a CPA’s last name under the Profession listing for Accountancy – CPA at Verify.tn.gov.
- Look up an attorney in the Online Tennessee Attorney Directory.
- Check an Enrolled Agent’s status with the IRS Office of Enrollment at (855) 472-5540 or EPP@irs.gov.
For more information:
- Return Preparer Fraud Is on the IRS Annual “Dirty Dozen” List of Tax Scams to Avoid During the 2016 Filing Season
- Tennessee’s Consumer Affairs Division: Avoid Tax Return Preparer Fraud
Need help with your tax return? The Crisler CPA team is here to help you. Contact us with any questions you may have or if you would like to get the process started.