Tax rules and regulations can be complex and confusing. Taxpayers may decide that they want assistance in preparing their tax returns. While most tax preparers are professional, honest and provide excellent service to their clients, some preparers may engage in fraud and other illegal activities.
Preparer fraud involves the preparation and filing of false tax returns. This may include (but not limited to) inflating personal or business expenses, manipulating dependents to fraudulently claim tax credits, understanding or misstating income, and using false documents or persons to claim refunds are just a few examples. In some cases, the taxpayer may not be aware of fraudulent activities, however the taxpayer not the preparer must pay the additional taxes, penalties and interest.
It is important to know that even if someone else prepares your tax return, you the taxpayer is ultimately responsible for all the information on the tax return. Also, if you participate in the illegal activity, you also may be subject to criminal prosecution.
Here are some helpful hints when choosing a return preparer:
- Beware of preparers who base their fees on a percentage of the amount of the refund
- Beware of preparers who claim they obtain larger refunds than other preparers
- Use a reputable tax preparer that signs your tax return and provides you with a copy for your records
- Take into consideration whether the individual or firm will be around to answer questions in regards to the preparation of your tax return months, even years later.
- Review your return before you sign it and ask questions if you don’t understand something.
- Inquire as to the person’s credentials. Only attorneys, CPAs and enrolled agents can represent taxpayers before the IRS in all tax matters including audits, collection, and appeals. Other preparers may only represent taxpayers for audits of returns they actually prepare.
- Get references. Is there anyone you know that has used this tax professional? Were they satisfied with the service provided?
- Reputable preparers will ask to see receipts and will ask multiple questions. By doing this they are trying to help their clients avoid possible penalties, interest or additional tax as a result of an IRS examination.
- Recent legislation requires that anyone who prepares a tax return for compensation must be registered with the Internal Revenue Service, and have a Preparers Tax Identification Number (PTIN).
- Choosing a tax preparer is as important as choosing a doctor or lawyer!
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An enrolled agent, licensed by the US Department of the Treasury to represent taxpayers before the IRS for audits, collections and appeals. To attain the enrolled agent designation, candidates must demonstrate expertise in taxation, fulfill continuing education credits and adhere to a stringent code of ethics.