This is the time of year when many taxpayers are scambling to file their 2021 IRS tax returns before the October 17th extension deadline. This is also the time of year when some taxpayers are trying to file their 2019 and 2020 tax returns by September 30th so that they can escape the failure to file penalty for those years. And this is also the time of year when some taxpayers are planning ahead and start looking for a tax preparer to handle their 2022 income tax return filings. So, here are some reminders about how to choose a tax preparer.
CHECK OUT THE TAX PREPARER
First, check out anyone you are considering with handling your taxes. You can start with the Better Business Bureau but there are other more advanced ways of checking out a tax preparer. The IRS says that for CPAs, taxpayers should check with the State Board of Accountancy. For attorneys, they should check with the State Bar Association. For enrolled agents, they can verify their status through the IRS directly on the IRS.gov website. Here’s another way to check out a tax preparer: ask a friend or relative to recommend someone they have used.
ASK THE TAX PREPARER ABOUT THEIR FEES
Asking about fees up front can help you find a tax preparer that you are comfortable working with. And asking about fees up front can help alert you to a tax preparer who might be out to cheat you or even steal from you. The IRS frequently warns about tax preparers who might try to scam you.
The IRS says that “taxpayers should avoid tax return preparers who base their fees on a percentage of the refund” and this makes sense. When you first call a tax preparer, how do they know if you are getting a refund? A tax preparer who says their fees will be based on your refund might alter numbers or claim false deductions or credits to boost their fee and that could get you in serious trouble.
BEWARE “GHOST TAX PREPARERS”
The IRS has a term for paid tax preparers who are out to cheat you or steal from you. They are called “Ghost Tax Preparers.” Ghost Tax Preparers make big promises and will ask for money in advance and divert money to themselves that should be going directly to you. Every year there are Ghost preparers who rip off taxpayers. A ghost preparer typically doesn’t sign returns in an attempt to hide their identity from the IRS.
By law, anyone who is paid to prepare or assists in preparing a tax return must have a valid Preparer Tax Identification Number or PTIN. Paid preparers must sign and include their PTIN on the return. Not signing a return is a red flag that the paid preparer may be looking to make a fast buck by promising a big refund or charging fees based on the size of the refund.
Unscrupulous tax return preparers may also:
- Require payment in cash only and not provide a receipt.
- Invent income to qualify their clients for tax credits.
- Claim fake deductions to boost the size of the refund.
- Direct refunds into their bank account, not the taxpayer’s account.
Choose a tax return preparer wisely because the taxpayer is ultimately the one who is responsible for your tax return.
OTHER DANGER SIGNS WITH TAX PREPARERS
Also, be careful that the tax preparer doesn’t rip you off by having your refund deposited into their own bank account. Savvy taxpayers should verify both their routing and bank account number is on the completed tax return for any direct deposit refund. And taxpayers should watch out for preparers putting their own bank account information onto the returns.
A serious danger sign is doing business with a tax preparer might offer to deposit all or part of the refund into their own financial accounts. What is that all about? Why would a tax preparer ask you to have your refund sent to their account? If that isn’t a danger sign, what is? I can just imagine my refund going into a tax preparer’s account and then the tax preparer taking off to the Bahamas.
You should also be wary of tax return preparers who claim they can get larger refunds than their competitors. Look, I can fill out a tax return that gets you a huge refund — but that doesn’t mean you will actually get the refund, or avoid an audit, or avoid jail.
BE SURE YOUR TAX PREPARER WILL E-FILE YOUR RETURN
E-filing is a must if you anticipate a refund. When you e-file a return with a direct deposit indicated, there is a very good chance that you will get your money in two to three weeks after it’s filed. So be sure your tax preparer will e-file your return if you are expecting a refund from the IRS. Paper returns can take six months or longer to be processed and we have heard about taxpayers waiting longer than six months and even up to a year for getting a refund check.
There is another good reason for filing your return electronically. You will be alerted right away if there is someone trying to claim your identity and trying to steal your IRS tax refund.
IS YOUR TAX PREPARER AVAILABLE YEAR ROUND?
Is your tax preparer going to be available year round? Your tax preparer might be available during the tax filing season, but what if the IRS sends you a notice three months later? Will your tax preparer be available to answer questions or respond to the IRS notice? Take your preparer’s business schedule into consideration.
YOUR TAX PREPARER SHOULD SIGN YOUR RETURN AS A PAID PREPARER
This is worth saying again, although we mentioned in when discussing Ghost Tax Preparers. While you, the taxpayer, are responsible for what your tax return says, your paid tax preparer should sign your tax return and indicate their paid tax preparer identification number. This is another level of protection for you. That identification number is issued by the IRS. And be sure you understand what the credentials are that any tax preparer presents to you.
MAKE USE OF A FREE CONSULTATION
If your tax preparer offers a free consultation, make use of it. We offer a free telephone consultation to discuss your tax issues, and we’ll also talk to you about where your refund might be if you filed your tax return before with someone else. We’ll also talk to you about your options for resolving your IRS tax debt. We can discuss with you the IRS Fresh Start Program, and the IRS Offer In Compromise Program. We can also discuss with you some fine points of the tax law such as the Innocent Spouse Rule. If you are not qualified for the IRS Fresh Start Program and the IRS Offer In Compromise Program we can discuss with you other options for resolving your IRS tax debt including the various payment plans that the IRS offers. Always make use of a free consultation and the video below will help you understand how easy it is to get a free consultation with us.
The first phone call you make to a tax preparer to get a free consultation and to ask the questions listed above could be your most important phone call. Make the call. Ask the questions.
Here again is the direct phone number to call our senior tax resolution specialist Tom at our office: 949-359-0810