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IRS; Choose Reputable Return Preparers

posted Feb 12, 2017, 8:44 PM by Zaher Fallahi

IRS “Dirty Dozen” Series of Tax Scams for 2017 Includes Return Preparer Fraud; Choose Reputable Return Preparers

 

February 6, 2017, WASHINGTON — The IRS today warned taxpayers to be on the lookout for unscrupulous tax return preparers, one of the most common “Dirty Dozen” tax scams during tax season. 

 

The vast majority of tax professionals provide honest, high-quality tax returns. But there are some un-unscrupulous preparers who set up shop each year to 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 where unscrupulous preparers steal from their clients and misfile their returns."  

 

Return preparers are a vital part of the U.S. tax system. About 60% of taxpayers use tax professionals to prepare their annual ax returns.  Illegal scams can lead to significant penalties, interest and potential criminal prosecution. IRS Criminal Investigation works closely with the Department of Justice (DOJ) to shutdown scams and prosecute the perpetrators. 

 

Choosing Return Preparers Carefully 

It is important to choose carefully when hiring an tax prepare. Well-intentioned taxpayers can be misled by preparers who do not understand taxes and mislead people into taking credits or deductions they are not entitled to in order to increase their own fees. 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 the tax preparer if she or he has an IRS Preparer Tax Identification Number (PTIN). Paid tax return preparers are required to register with the IRS, obtain a PTIN and include it on the second page of the Form 1040.

 

Inquire if the tax 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, and competent tax professional needs to be up-to-date in the new laws. Tax return preparers are not required to have a professional credential. Visit the IRS website for 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 your desired qualifications

 

The IRS Directory is a searchable and sortable listing of certain preparers registered with the IRS. It includes the name, city, state and zip code of:

 

1) Attorneys

2) CPAs

3) Enrolled Agents

4) Enrolled Retirement Plan Agents

5) Enrolled Actuaries

6) Annual Filing Season Program participants

 

Check the preparer’s history. Inquire of the Better Business Bureau about the preparer. Check for disciplinary actions and the license status for credentialed preparers. For CPAs, check with your State Board of Accountancy. For attorneys, check with you 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 asking about their services and fees. Unfortunately, some preparers have improperly filed returns without the taxpayer’s permission once they obtain the records.

 

Ask to e-file your return. Be sure your preparer offers e-filing service. Paid preparers who prepare 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 will 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 only last pay stub instead of your annual Form W-2. This is against IRS e-file rules.

 

Make sure the return 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, subject to limitation. 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 tax return. Don’t use a tax preparer that asks you to sign an incomplete or blank tax form.

 

Review your tax return carefully before signing, and ask questions if something is not clear. Make sure you are comfortable with the accuracy of the return before you sign it and that your tax 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 recommended.

 

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 permission, 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 tax preparer directory, and learning how to submit a complaint regarding a 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.

 

Zaher Fallahi, CPA, Tax Attorney, is a Tax Resolution Attorney and defends taxpayers before the IRS (FBAR, FATCA and OVDP), FTB, EDD and BOE. Telephone: (310) 719-1040 (Los Angeles), (714) 546-4272 (Orange County), or e-mail: taxattorney@zfcpa.com

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