Importance of choosing your tax preparer wisely

The IRS included tax return preparer fraud on its “Dirty Dozen” list of common tax scams for 2019.  When the IRS discovers an unscrupulous tax preparer, they will often review all of their tax returns.  Taxpayers are ultimately responsible for their tax return, regardless of who prepares it.

In the past decade, the Department of Justice has obtained injunctions against hundreds of unscrupulous tax preparers and tax scheme promoters.  There are many fraudulent techniques used by dishonest tax preparers.

Fraudulent tax preparers can claim bogus expenses, deductions, exemptions and credits on your tax returns to get a bigger refund.  It becomes your problem when the IRS discovers the fraud.  You are the one who will have to pay the additional taxes, interest and be subject to penalties and criminal prosecution.  If the return contains fraudulent deductions, you can be banned from taking the earned income tax credit in future years, which can affect your future tax returns by thousands of dollars.

Disreputable preparers can give clients a form to sign that grants the preparer permission to file the return and for the refund to come to the preparer instead of the client.

Unscrupulous tax preparers can sell their client’s personal data.

Another scam is giving you a copy of your tax return and later changing the tax return to create a larger refund.  The tax preparer then keeps the increased amount of the refund.

Suggesting that you direct deposit your refund into an account that isn’t your bank account.  Preparers have told clients that this is more convenient or that your refund will arrive faster.  This is prohibited by the IRS for a very good reason since doing this can result in you losing your entire refund.

One of the newest scams by tax preparers is telling clients they must pay a penalty for not having health insurance.  The preparer requests that the client pay the unnecessary penalty directly to them and keep the money.

Other illegal activity includes refusing to sign tax returns, filing the tax return as self-prepared, refusing to provide a copy of the return and refusing to return documents until the tax prep fee are paid.

If you believe you have used an unscrupulous tax preparer, you should have a CPA, enrolled agent or tax attorney review your return.  If your return needs to be corrected have a qualified tax professional prepare an amended return.

Abusive tax preparers can be reported to the IRS on Form 14157 along with all supporting documentation.

 

David Zubler is the author of three books and a philanthropist.  All of his proceeds from the books go to a charitable foundation he created for underprivileged children.  He is also the founder of Your Tax Care which provides tax education.