It is tax season and it is time to think about getting your taxes done. This time of year is filled with angst for most people.
The IRS claims that 60% of taxpayers will use tax professionals in the preparation of their returns. In my view, getting the help of a competent preparer is very important. I always caution people against preparing their own returns. I very much appreciate “do-it-yourselfers” – it is very satisfying to be able to handle your own problems and not have to get help.
Unfortunately, the government has made the filing of a return incredibly burdensome and complicated. The fact that the tax code is complicated is not news to anyone. Getting competent and trustworthy help is very valuable.
Take tax credits, for instance. There are tax credits for:
- just earning an income (Section 32)
- having a child (Section 24)
- becoming disabled (Section 22)
- buying a car (Sections 30, 30B, 30D)
- getting health insurance (Section 35)
- buying a house (Section 36)
- going to school (Section 25A)
Additionally, the number of business-related credits stretches for about 250 pages in very small print in my version of the Internal Revenue Code.
When it comes to these tax credits – there has been and will continue to be a large amount of preparer fraud.
When looking at your return be certain to look at page two of the 1040 – from approximately line 47 through 53. Make sure you understand what credits are being claimed. The US Tax Court has been prone to use the “too good to be true” maxim when analyzing cases. If you have a child tax credit and you don’t have a child – you have a problem.
The IRS also has a list of tips on how to choose your preparer. All of them are good:
- Check the preparer’s qualifications. All paid tax return preparers are required to have a Preparer Tax Identification Number. In addition to making sure they have a PTIN, ask if the preparer belongs to a professional organization and attends continuing education classes.
- Check on the preparer’s history. Check with the Better Business Bureau to see if the preparer has a questionable history. Also check for any disciplinary actions and for the status of their licenses. For certified public accountants, check with the state boards of accountancy. For attorneys, check with the state bar associations. For enrolled agents, check with the IRS Office of Enrollment.
- Ask about service fees. Avoid preparers who base their fee on a percentage of your refund or those who claim they can obtain larger refunds than other preparers can. Also, always make sure any refund due is sent to you or deposited into an account in your name. Taxpayers should not deposit their refund into a preparer’s bank account.
- Ask to e-file your return. Make sure your preparer offers IRS e-file. Any paid preparer who prepares and files more than 10 returns for clients must file the returns electronically, unless the client opts to file a paper return. IRS has safely and securely processed more than one billion individual tax returns since the debut of electronic filing in 1990.
- Make sure the preparer is accessible. Make sure you will be able to contact the tax preparer after you file your return, even after the April 15 due date. This may be helpful in the event questions arise about your tax return.
- Provide records and receipts. Reputable preparers will request to see your records and receipts. They will ask you questions to determine your total income and your qualifications for deductions, credits and other items. Do not use a preparer who is willing to e-file your return by using your last pay stub before you receive your Form W-2. This is against IRS e-file rules.
- Never sign a blank return. Avoid tax preparers that ask you to sign a blank tax form.
- Review the entire return before signing. Before you sign your tax return, review it and ask questions. Make sure you understand everything and are comfortable with the accuracy of the return before you sign it.
- Make sure the preparer signs and includes their PTIN. A paid preparer must sign the return and include their PTIN as required by law. The preparer must also give you a copy of the return.
- Report abusive tax preparers to the IRS. You can report abusive tax preparers and suspected tax fraud to the IRS on Form 14157, Complaint: Tax Return Preparer. If you suspect a return preparer filed or altered a return without your consent, you should also file Form 14157-A, Return Preparer Fraud or Misconduct Affidavit.