MICHIGAN (WXMI) — The Michigan Association of Certified Public Accountants says it's important for people to carefully chose who files their tax return this year.
Tax preparer scams are one of the IRS’ “Dirty Dozen” tax scams.
According to the agency, they regularly receive reports of unscrupulous preparers who, rather than help customers, hurt them and use their tax returns to commit fraud, identity theft or other crimes.
“Those are really intentional and that's why it's important to make sure that that you really review your tax return when it's prepared,” said Chris Picciurro, Teaching Tax Flow and Integrated CPA Group. “It really ties down to having someone that you trust, having someone that's accountable.”
According to Picciurro, in most cases, preparers claim dependents, typically children, when they should not, and take some of the credits offered.
For example, in 2021, a federal court in the Western District in Michigan permanently enjoined a Holt married couple from preparing returns for others after an IRS investigation found they often inflated their client’s dependency exemptions and earned income tax credits or lowered a head of household status to get a higher refund.
According to a civil complaint filed, the couple pocketed refunds in some cases.
Since then, a federal court in the Eastern District of Michigan has twice shut down Detroit-area preparers.
Picciurro notes errors or false information on a return leaves taxpayers open to liability for unpaid taxes, penalties, and interest. He stressed the need for people to properly vet preparers.
“Be organized and have a nice list of questions,” said Picciurro. “Think about major changes that you had in your life - Did you have a did you have a child? Did you change your marital status? Did you refinance your home? Did you change residences or something like that, that could really affect your tax situation? So, being prepared is really the key to getting one the best result possible.”
According to the IRS, taxpayers should consider the following:
- 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 Verify the Status of an Enrolled Agent or check the IRS Directory of Federal Tax Return Preparers.
- 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.
- 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 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.
