Most tax professionals are honest, but some fraudulent preparers take advantage of unsuspecting taxpayers. Unscrupulous preparers may file false tax returns or simply falsify tax information. In order to increase the refund amount, they may alter income figures, deductions, business expenses, credits and/or exemptions.
Even if a false return is filed without the knowledge of the taxpayer, the taxpayer is held responsible for the incorrect information. The fraudulent preparer faces a fine and/or imprisonment, but the taxpayer will be required to pay the entire tax debt originating from the false return.
In order to avoid falling victim to dishonest return preparers, taxpayers should follow some basic suggestions:
- Ask the return preparer for his Personal Tax Identification Number (PTIN), which is required of all preparers by the IRS.
- Be wary of preparers that promise a larger refund than others.
- Avoid hiring preparers who base their fee on the percentage of the refund.
- Check the background and qualifications of the preparer. Only attorneys, enrolled agents, and CPAs can represent taxpayers before the IRS in all matters.
- Do some research to gain more information about the return preparer and his/her reputation.
Legitimate preparers will ask you to provide them with receipts of the expenses you want to deduct, income sources, and so on. An erroneous deduction or credit can cause a taxpayer to owe back taxes to the IRS. Even though a return preparer files the return, ultimately the consequences fall on the taxpayer.
When choosing your return preparer, you may use the IRS’ Directory of Federal Tax Return Preparers. The IRS recently created this directory to help return filers reach legitimate return preparers in a simple, convenient way.