The Indiana Department of Revenue (DOR) continues to partner with the Internal Revenue Service (IRS) to share the top tax filing season concerns referred to as the “IRS Dirty Dozen” tax scams for 2018.
The fourth scam in the 12-part series is tax preparer fraud. Tax preparer fraud occurs when deceitful tax preparers are looking to make a quick buck off of honest individuals seeking tax assistance. This fraud may include inflated charges, advising clients to take credits or deductions they aren’t entitled to or ghost preparation.
“Tax preparers play a vital role in submitting tax returns, with over half of U.S. taxpayers utilizing these services,” said DOR Commissioner Adam Krupp. “While the majority of tax professionals provide honest, high-quality service, individuals should be aware of dishonest preparers looking to collect high fees for fraudulent filings.”
Inflated charges are usually due to tax preparers basing their fees on a percentage of a client’s refund. These preparers often advertise bigger refunds than their competition. Only give tax documents or personal information to a preparer once they have been selected to file your taxes; do not provide this information when asking about fees or services. Criminal tax preparers have improperly filed a tax return without taxpayer permission using this information.
A good tax preparer will ask questions to determine the client’s total income, deductions and tax credits. In addition, they should ask for records and receipts for any credit or deduction claimed. Claiming deductions or credits the taxpayer isn’t qualified for, often leads back to the preparer collecting more fees based on the client’s refund.
A ghost preparer collects a fee from the client to prepare a return, but does not sign the return. This return appears to be self-prepared. A legitimate tax preparer will sign the return and provide their Preparer Tax Identification Number (PTIN) from the IRS. These ghost preparers don’t want to be responsible for any consequences of an incorrect return, which is often due to false reporting of income or expenses. The taxpayer is then responsible for any audit.
“Selecting the right tax preparer who is trusted and credentialed should be critically important to taxpayers because the taxpayer is ultimately who is responsible for what is submitted to DOR and the IRS,” said Commissioner Krupp.
DOR and the IRS offer several tips for individuals to consider when choosing a tax preparer:
- Avoid fly-by-night tax preparers. Make sure the preparer you select will be available well after the return is filed. In the event that questions come up about the return, a reputable tax preparer should be available to assist.
- Check on tax preparer’s qualifications. The tax preparer must have an IRS PTIN to charge for preparing tax returns. The IRS also has a Directory or Federal Tax Return Preparers with Credentials and Select Qualifications that can be accessed on their website at https://irs.treasury.gov/rpo/rpo.jsf.
- Check the preparer’s history. The Better Business Bureau, State Board of Accountancy, and State Bar Association are great options to access the tax preparer’s history.
- Never sign a blank return. Any tax preparer that asks a client to sign a return before it is complete, should be avoided. Review your return to ensure everything is correct and that the refund goes directly to you, not the preparer. Reviewing the routing and bank account number can help ensure your refund is going to the correct account.
- Report corrupt tax preparers to the IRS or DOR.
-IRS – Use Form 14157, Complaint: Tax Return Preparer and Form 14157-A, Return Preparer Fraud or Misconduct Affidavit to report to the IRS. Forms can be found at www.irs.gov.
-DOR – Report any fraudulent activity online at https://www.in.gov/dor/4792.htm or email email@example.com.
To view the first three of “IRS Dirty Dozen” tax scams of 2018, visit http://www.in.gov/dor/6137.htm.