Tax season is a time when taxpayers often look for professional assistance to help them navigate the complex process of filing their tax returns. While most tax preparers are honest and trustworthy, there are some who may take advantage of taxpayers by engaging in fraudulent activities. In this blog post, we'll discuss the risks posed by unscrupulous tax preparers, how to identify them, and what steps you can take to protect yourself and your money.
The Dangers of Unscrupulous Tax Preparers
Unscrupulous tax preparers can pose significant risks to taxpayers, including:
- Filing false deductions or credits: Dishonest tax preparers may inflate deductions or claim tax credits that you're not eligible for, putting you at risk of an audit, penalties, and interest charges.
- Charging excessive fees and advertising huge refunds via social media, cold calls and cold emails. These preparers charge exorbitant fees based on the size of the tax refund they promise, taking advantage of unsuspecting taxpayers.
- Stealing refunds: In some cases, unscrupulous tax preparers may divert your tax refund into their own bank accounts, leaving you without the money you're entitled to.
How to Identify a Trustworthy Tax Preparer
To protect yourself from unscrupulous tax preparers, follow these steps:
- Verify credentials: Choose a tax preparer with a valid Preparer Tax Identification Number (PTIN), and consider hiring a certified public accountant (CPA), enrolled agent (EA), or tax attorney with a good reputation.
- Research the preparer's history: Check online reviews and consult the Better Business Bureau for any complaints or disciplinary actions against the tax preparer.
- Avoid "guaranteed" refunds: Be cautious of tax preparers who promise large refunds without reviewing your financial situation. Legitimate preparers will never guarantee a specific refund amount without analyzing your tax information.
- Review the fees: Make sure you understand the fee structure before agreeing to work with a tax preparer.
- Double-check your return: Before signing your tax return, review it carefully to ensure all information is accurate. Remember, you are ultimately responsible for the contents of your tax return, even if a preparer completed it for you.
- Never sign a blank return: An unscrupulous tax preparer may ask you to sign a blank tax return, which they can then manipulate to their advantage. Always insist on reviewing and signing a completed tax return.
What to Do If You Suspect Fraud
If you suspect that a tax preparer is engaging in fraudulent activities, report the issue to the IRS. You can file a complaint using Form 14157, Complaint: Tax Return Preparer. If you suspect that your identity has been stolen, you should also file a complaint with the Federal Trade Commission and contact the three major credit bureaus to place a fraud alert on your credit file.
Tax season can be a stressful time, but with the right precautions, you can avoid falling victim to unscrupulous tax preparers. By being vigilant in your choice of a tax professional, reviewing your tax return carefully, and taking action if you suspect fraud, you can ensure a smooth tax filing experience and protect your hard-earned money.