When tax season rolls around, be careful who you trust with your return. It might come as a surprise, but there are a large number of organizations and individuals who pose as legitimate tax businesses in order to scam people out of their tax returns. When you’re trying to juggle a career, family, and a social life, it can be difficult to file taxes yourself, so many Americans rely on third parties to file on their behalf. However, when caught in the hustle and bustle of a busy life, remembering to check the credibility of your tax preparer might slip your mind.
How does Tax Preparer Fraud Work?
Preparer fraud is when someone posing as a qualified tax representative files your taxes and keeps your return. Over 56 percent of taxpayers use tax professionals to prepare their returns, and the consequences of fraudulent tax returns can be extremely detrimental for a number of reasons.
In some cases, fraudulent tax preparers will inflate your taxes with credits that you or your business don’t qualify for in order to get a larger return. For example, your taxes could claim deductions and tax credits for charitable donations, children, or student loan payments without your knowledge. The fake tax preparer will claim all of these tax credits and then run off with your over-inflated return—leaving you to deal with the consequences.
Before someone can dupe you into giving them preparation permission and filing privileges, they must mask themselves as a legitimate business. Some operations will go so far as to set up fake locations in strip malls or create websites and business cards. Determining whether or not someone is a credible tax practitioner can be difficult.
How Do I know who to Trust?
When someone offers you a deal that sounds too good to be true, it probably is. Your first red flag will be a promise of a large return for which you usually wouldn’t qualify. As enticing as it might sound, tax scammers find much of their success by making outlandish promises to lure people into trusting them. When it comes to discerning legitimate businesses from frauds, there are some signs you should look for:
- Tax Preparer Identification Number: Every qualified tax preparer will have a registered identification number with the IRS—you can check and reference this number on the IRS website. If they have a number and still file fraudulent tax returns, you will be able to provide their number during the criminal investigation.
- Solicitation: Because many of these scams don’t have an abundance of resources at their disposal, they tend to resort to cold calls and door-to-door solicitation. Never give out any personal or financial information until you have confirmed the legitimacy of a business.
- Review Your Return: Before you allow someone who might be questionable to file your return, take a look at their work. Make sure there aren’t any false tax credits claimed on your return. Never sign a blank tax form under any circumstance.
It won’t always be easy to tell, so it’s best to stick with recognizable companies who have verified reviews on Google, Yelp, and the Better Business Bureau.
Did a Tax Preparer Steal Your Money?
If you have been the target of fraudulent preparation and filing by a scammer, don’t panic. While it is a stressful experience, you shouldn’t lose hope. While the responsibility of a fraudulent tax return falls on the shoulders of the taxpayer, the IRS recognizes that innocent people can become victims. Here are some essential steps you need to take if a fraudulent tax preparer has taken advantage of you.
- Report it to the Authorities: Report any illegal dealing to the IRS fraud prevention hotline as soon as you become aware. Stealing someone’s tax return is a serious criminal offense and must be reported to the police. Gather any documentation of your financial dealings with the fraudulent tax preparer and make sure you get copies of the police report as well.
- File a Form 3949-A: Form 3949-A is an information referral that you should file with the IRS as a victim of false preparation and filing. This tax preparer fraud form will provide the IRS with any information about the fake business or individual who filed your fraudulent tax returns in addition to the tax violations.
- Protect Your Identity: In many tax fraud situations, a return is often the least of a taxpayer’s worries. Fraudulent tax preparers mat take a step further by using your Social Security number and personal information to open credit cards and bank accounts. Make sure you inform your bank and any other major financial institutions whom you do business with about your circumstances.
- IP PIN: When your identity is stolen, the IRS will issue you a unique PIN number that can be used to file your taxes and further protect your identity.
As daunting as the task might seem, recovering from tax fraud is possible. With the help of a qualified tax professional, getting back on your feet might be quicker and easier than you previously thought. Life doesn’t pause because someone has fraudulently filed your tax returns or stolen your identity; rely on the help of a CPA, tax attorney, or tax representative to take the stress and weight of the IRS off your shoulders.
If you have been the victim of tax preparation fraud, Community Tax has the tools and resources you need to recoup your losses and settle any outstanding debts you might have with the IRS. Don’t let return preparer fraud ruin your finances; Community Tax’s CPAs, tax attorneys, and tax representatives are standing by to assist you in any way they can. We understand how stressful having someone fraudulently file your taxes for you can be; don’t go in alone—Community Tax can help.