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How Do Tax Preparers Get You More Money

By David Krug David Krug is the CEO & President of Bankovia. He's a lifelong expat who has lived in the Philippines, Mexico, Thailand, and Colombia. When he's not reading about cryptocurrencies, he's researching the latest personal finance software. 4 minute read

You’re not alone if the thought of doing your own taxes makes you nervous. In the United States, approximately 60% of taxpayers who e-file use paid preparers to make sure everything is in order. Tax preparation on your own may be a daunting, time-consuming ordeal.

It might be a relief to have someone else handle the preparation of your tax return. However, entrusting the incorrect party with your tax return might have negative consequences. Just as there are unethical practitioners in every field, there are dishonest tax preparers wanting to make fast cash. The horrific stories of tax frauds performed on naive consumers are probably not new to you. Be wary of who you choose to do your taxes.

How to Choose an Experienced Tax Preparer

You may think that being a professional tax preparer would include satisfying specific standards for education, experience, or even undertaking a background check, given the intricacy of tax law and the fact that tax preparers have access to so much of their customers’ personal information. This, alas, is not the case.

Applying for a PTIN from the IRS and forking up the required $35.95 is all that’s required for anyone to launch their own tax preparation service. If you need help with your tax returns, be sure the person you employ has a PTIN. In addition, consider the following suggestions.

  1. Examine the IRS Directory

PTIN holders who now have IRS-recognized qualifications (such as CPA, EA, or attorney) or who have completed the Annual Filing Season Program are listed in an IRS database (voluntary continuing education courses covering federal tax law and ethics held each year). 

A PTIN may be obtained by practically anybody, however the accredited preparers listed below usually have greater knowledge, training, or experience.

  1. Examine Marketing Claims

Carefully evaluate any tax preparer who guarantees a higher refund than their competition.

  1. Examine Preparation Fees

Tax preparers often charge by the hour or for a set fee. Tax preparers whose price is a portion of your refund should be avoided at all costs. As a result of the fees they charge, they may be tempted to inflate your return by claiming items that do not apply.

  1. Examine Your Tax Return Before Filing

Warning signs include being asked to sign a blank tax form, being denied a copy of your return, or being denied access to your return before it is filed. Such actions also run counter to Circular 230, the IRS’s rulebook for professionals.

Filing Form 14157 (Return Preparation Complaint) with the IRS is the procedure to follow if you suspect a tax preparer of engaging in dishonest or illegal tax practices.

  1. Inquire about year-round availability.

It is fairly uncommon for tax preparers to open for business on January 1 and close shop by April 15. (though with 2019 taxes not due until July 15, that may change for 2020). If something goes wrong with your tax return, you may need your preparer’s assistance months or even years after it has been submitted. They won’t be of much use if they aren’t there. Hire someone whose schedule is flexible throughout the year.

  1. Examine the Preparer’s Credentials

It’s important to keep in mind that not all tax professionals with federal tax return preparation qualifications are equally qualified while perusing the IRS database. All proceedings, including audits, collections, and appeals, before the IRS must be handled by a tax attorney, CPA, or registered agent.

A representative from the Annual Filing Season Program can only sign and file your return on your behalf. This implies they are unable to assist you with problems from the past.

  1. Request Information about Professional Memberships

Many people working in tax law are also members of organizations that offer them access to training opportunities and set standards for ethical behavior. The IRS keeps track of organizations that it has established a relationship with as far as tax experts go.

A preparer’s membership in one or more of these organizations is no guarantee of their legitimacy, but many scammers will not want to spend the money required to join.

Do a quick search to check whether any of your tax professional’s previous clients have lodged a formal complaint.

  1. Expect a thorough preparation from your preparer.

You should make sure your preparer asks you many questions and requests to view all relevant paperwork. That way, they can see if you qualify for any tax advantages, and how to best categorize your expenditures. It saves you money in the long run by preventing fines. You should be concerned if your tax preparer asks you very few or no questions at all.

  1. Examine Your Tax Return Before Filing

Even if you have someone else do your tax return for you, you are accountable and liable for its accuracy and completeness. Always double-check your tax return for accuracy before signing it.

Do not sign your return if you have any doubts regarding its accuracy. If you have any questions about your income, deductions, or tax credits, be sure to ask your tax preparer. By signing the return, you swear (under penalty of perjury) that the information provided is true and full.

Bottom Line

Don’t allow the prospect of inexpensive costs or a large refund convince you to choose a tax preparer without first doing a comprehensive background check.

No amount of money saved or unexpected refund will make up for the stress of an identity theft or IRS audit, especially if your dishonest tax preparer has already left town by the time you find out something is amiss.

This tax season will be stress-free if you choose a qualified tax preparer and thoroughly evaluate their work.

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