When you take your taxes to a professional, you’re expecting to gain the peace of mind that comes with correctly prepared taxes. However, while you think you are doing the right thing, you may find out months later there were too many deductions claimed or the numbers didn’t fully add up on your return. This is what we call an unfortunate encounter with rip-off tax preparers.
Rip-off Tax Preparers: Who Are They?
During the peak of tax season, you can’t avoid seeing them. The young kids dressed as Lady Liberty or Uncle Sam are stationed in front of every shopping mall, holding signs coaxing taxpayers to come in and have their taxes prepared. Many of these establishments are legitimate and established, but some have just set up shop with only one goal: to get you the biggest refund possible by any means necessary.
Getting a big return is great, right? Not necessarily. The way these shops rake in money is by charging you a percentage of your refund. So the bigger the refund, the more they can charge you. There are plenty of these rip-off tax preparers around, all promising large refunds while preparing clients’ taxes fraudulently.
A former detective in Fort Pierce, Fla., along with his wife and business partner, prepared taxes for their community at their Premium Financial Services business for years until they were indicted on charges of tax fraud. The trio claimed false tax deductions on their clients’ returns in order to intentionally rip-off the United States government for upwards of $500,000. Furthermore, clients were faced with a tax debt because of the rip-off.
A man from Jacksonville, Fla., is now serving prison time for a First-time Homebuyers credit rip-off he pulled for clients who had not bought a home, and/or had no plans to buy a home. He also claimed fraudulent business and work expenses, resulting in $216,000 in tax credits claimed over the course of two years. Of course, he charged his clients a $1,000 tax preparation fee, but many were glad to pay it because of the large returns they were receiving.
Rip-off Red Flags
Taxpayers are not always aware of the red flags they should look for when getting a professional to prepare their tax returns. We have identified five main things to consider when having your taxes prepared:
1. Check to see how long your tax preparer has been in business.
Fly-by-night shops and those set up seemingly overnight are the usual suspects.
2. Check all credentials of the professional preparing your taxes.
They should be proud to show you their degrees or certificates. If not, run.
3. Check to make sure the professional has signed your return.
If they do not want to attach their name to your taxes, then you shouldn’t either. Remember, once you sign the return, any resulting liabilities are your responsibility.
4. Never sign a blank return.
5. Beware of tax preparers whose fee is a percentage of your refund.
They have more motivation to prepare your taxes with erroneous claims.
If you are a victim of a tax preparer rip-off, we can help. At MoneySolver, our goal is to help taxpayers resolve their IRS debt quickly and affordably.