When tax season rolls around, over 50 percent American taxpayers opt to have their taxes done using professional tax preparer services in hopes that it will give them a more accurate and more fruitful tax return. While there are many, many reputable tax preparers out there, there are a few less than reputable, too.
It may come as a surprise, but according to Treasury.gov, there are a large number of organizations and individuals who pose as legitimate tax businesses in order to scam people out of their money, and leave them in a world of legal trouble. Tax preparer fraud is the dark side to the world of professional tax practitioners.
If you’re looking to enlist the help of a professional this tax season, read on to learn everything you need to ensure you don’t fall victim to this destructive scam.
- What is Tax Preparer Fraud?
- Find a Tax Preparer You Can Trust
- Did a Tax Preparer Steal Your Money?
- Tax Preparer Fraud Victim Resolution
What is Tax Preparer Fraud?
Tax preparer fraud typically occurs when a person posing as a qualified tax preparer excessively and illegally claims deductions and credits on your behalf to inflate your tax return. In return, they charge you a percentage of your total return as a fee for their services. Thesee tax preparers take their fee and run—leaving you to deal with the consequences.
How does Tax Preparer Fraud Work?
Fraudulent tax preparers operate under the guise of qualified and trustworthy tax professionals. They front as a legitimate business and advertise in public spaces, such as community centers, churches, and more. They promise big returns—legally, of course. While they appear to be legit, they’re much less.
Once you’ve handed over all of your tax information and agreed to pay their fee, which is always based on a percentage of your return, they’ll begin their illegal behavior. Unbeknownst to you, these fraudsters excessively claim credits, deductions, exemptions, and more on your behalf. For example, your taxes could claim deductions and tax credits for charitable donations, children, or student loan payments without your knowledge.
When it comes time to submit, these tax preparers will file on your behalf, without giving you the chance to look over your return. They don’t sign as the tax preparer on your tax return or include their Preparer Taxpayer Identification Number (PTIN), leaving you looking like the fraudulent filer. By the time you realize your return contains false information, these tax preparers are long gone, and never to be seen again.
Fraudulent tax preparers operate on two basic facts. First, taxpayers most often hire tax professionals because they trust that the tax professional is reputable and responsible. Second, the IRS will always hold the taxpayer responsible for their tax return, whether it was completed by a professional or not.
Find a Tax Preparer You Can Trust
If you’re seeking assistance with the completion and filing of your taxes, it is imperative that you are both careful and discerning when it comes to choosing your tax preparer.
How to Choose a Tax Preparer
When it comes to choosing a tax preparer, there are a few red flags that indicate your prospective preparer may be a fraud. Those include:
- The promise of a larger refund than other tax preparers can get you: Reputable tax preparers will never try to lure you in with a deal that sounds too good to be true.
- A fee that’s based on a percentage of your tax return: This suggests a tax preparer may be willing to commit fraud to inflate their own paycheck.
- Cash payment: A reputable tax preparer will never require you to pay in cash.
- Solicitation: Fraudulent taxpayers often set up shop in busy areas to solicit customers. They also may knock door-to-door or contact you by phone to solicit your business.
In addition to the above, it’s always important to verify your tax preparer and their work. Ask for the following:
- Tax Preparer Identification Number (PTIN): Every qualified tax preparer will have a registered identification number with the IRS. You can check and cross-reference reference this number on the IRS Tax Return Preparer Directory. If they have a number and file a fraudulent tax return on your behalf, you will be able to provide their number during the criminal investigation.
- 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.
- Verify the Direct Deposit Information: If you opt to receive your refund by Direct Deposit, ensure that it’s your bank account and routing number—not theirs.
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 and will issue tax preparer penalties, too. Here are some essential steps you need to take if a fraudulent tax preparer has taken advantage of you.
Report it to the IRS
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.
When your identity is stolen, the IRS will also issue you a unique PIN number that can be used to file your taxes and further protect your identity.
File a Tax Return Preparer Complaint
Form 3949-A is an information referral that you should file with the IRS as a victim of false preparation and filing. If you file a tax preparer complaint, this 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.
Report it to Your Bank
In many tax fraud situations, a return is often the least of a taxpayer’s worries. Fraudulent tax preparers may 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.
Tax Preparer Fraud Victim Resolution
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. We also offer everything you need to keep your taxes in check, including IRS assurance services, accounting services, bookkeeping services and more. 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.