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Tax Tip Tuesday: Beware of fraudulent tax preparers

Last year, tax preparers handled more than 1.6 million federal returns in Indiana, but the IRS says you have to be careful.
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Posted at 6:01 AM, Mar 14, 2023

INDIANAPOLIS — The Internal Revenue Service is reminding taxpayers to be on the lookout for fraudulent and unscrupulous tax preparers.

Last year, tax preparers handled more than 1.6 million federal returns in Indiana, but the IRS says you have to be careful.

“Be aware of preparers that promote large refunds,” said Stacy Engle, an IRS spokesperson based in Indianapolis. “That's generally a red flag. Be aware of preparers that base their fees on your refund amount. Make sure you don't sign a tax form that isn't fully filled out. Never sign a blank form."

You can log onto IRS.gov and search for tax preparers with credentials and certain qualifications.

For example, an enrolled agent means they are licensed by the IRS.

Click here to verify the status of an enrolled agent.

A certified public accountant is licensed by the state of Indiana.

Engle says anyone who does your taxes must have a Preparer Tax Identification Number or PTIN, so make sure to ask for that number.

"If you pay for the service, they have to provide copies of any tax returns they've prepared for you,” said Engle. “ And all of the information you gave them to do your return, they're required to give that back to you."

If you think your tax preparer committed fraud, you can file a complaint here with the IRS.

They will investigate and could take action against the tax preparer.

If there's a mistake on your tax return, ultimately you the taxpayer are responsible not your tax preparer, said Engle.

So, make sure to check your return fully before you sign it.

ADDITIONAL TIPS FROM THE IRS ON CHOOSING A TAX PREPARER:

  • Look for a preparer who’s available year-round. If questions come up about a tax return, taxpayers may need to contact the preparer after the filing season is over.
  • Review the preparer’s history. Check the Better Business Bureau website for information about the preparer. Look for disciplinary actions and the license status for credentialed preparers. For CPAs, check the State Board of Accountancy’s website, and for attorneys check with the State Bar Association. For enrolled agents go to IRS.gov [lnks.gd] and search for “verify enrolled agent status” or check the IRS Directory of Federal Tax Return Preparers [lnks.gd].
  • Ask about service fees. Taxpayers should avoid tax return preparers who base their fees on a percentage of the refund or who offer to deposit all or part of the refund into their own financial accounts. Be wary of tax return preparers who claim they can get larger refunds than their competitors.
  • Ensure their preparer offers IRS e-file. The IRS issues most refunds in fewer than 21 days for taxpayers who file electronically and choose direct deposit [lnks.gd]
  • Provide records and receipts. Good preparers ask to see these documents. They’ll also ask questions to determine the client’s total income, deductions, tax credits and other items. Do not hire a preparer who e-files a tax return using a pay stub instead of a Form W-2. This is against IRS e-file rules.
  • Understand the preparer’s credentials and qualifications. Attorneys, CPAs and enrolled agents can represent any client before the IRS in any situation. Annual Filing Season Program [lnks.gd] participants may represent taxpayers in limited situations if they prepared and signed the tax return.
  • Never sign a blank or incomplete return. Taxpayers are responsible for filing a complete and correct tax return.
  • Review the tax return before signing it. Be sure to ask questions if something is not clear or appears inaccurate. Any refund should go directly to the taxpayer – not into the preparer’s bank account. Review the routing and bank account number on the completed return and make sure it’s accurate.