As unethical preparers often do not sign the tax return and attach PTIN, the taxpayer could become liable for inaccuracies
The U.S. Internal Revenue Service (IRS) has cautioned taxpayers against falling prey to bogus tax preparers. The Federal agency has asked taxpayers who are filing the returns to guard against unscrupulous elements. The IRS has cautioned taxpayers even as it is continuing with the process of sending out automatic stimulus payments.
Last month, the IRS began sending out about $2.4 billion to taxpayers who had not received their stimulus payments announced in 2021 following the economic slowdown after the COVID pandemic. The target was to send up to $1,400 to about 1 million taxpayers by the end of January.
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Credit against missed stimulus payments
The IRS put stimulus payments on autopilot after many taxpayers failed to claim the Recovery Rebate Credit on their 2021 tax returns. The Recovery Rebate Credit is a refundable credit for individuals who did not receive one or more Economic Impact Payments (EIP), also known as stimulus payments, an AP report said.
While the stimulus payments are on, the IRS said in a recent statement that “ghost” preparers who won’t sign the tax return as the paid preparer and asks the taxpayer to sign and file the return themselves should be avoided. This is because the IRS requires tax preparers to sign returns and not doing so is a red flag and may signal fraud. These “ghost” preparers, the IRS warned, may be looking to make a quick profit by promising large refunds or charging fees based on the quantum of the refund amount.
These unscrupulous “ghost” preparers often print the return and have the taxpayer sign and mail it to the IRS. For electronically filed returns, a “ghost” preparer will prepare the tax return but refuse to digitally sign it as the paid preparer, the IRS said. Taxpayers should avoid such unethical behavior as it can indicate fraud.
Choose trustworthy tax pro
The agency has urged taxpayers to always choose a tax preparer with a valid Preparer Tax Identification Number (PTIN). It points out that anyone who gets paid to prepare or assist in preparing federal tax returns must have a valid PTIN. This PTIN should be attached to the tax return along with the digital signature of the preparer.
Fradualent players are not uncommon although most tax pros are trustworthy and provide high-quality service. Some engage in identity theft and run other scams. “Taxpayers must understand who they’re hiring and ask the right questions before handing over their sensitive personal and financial information.”
When a tax preparer fails to sign the return, the taxpayer becomes legally responsible for the accuracy of their filing.
Tools available to help taxpayers
There is a database of tax preparers – the Directory of Federal Tax Return Preparers with Credentials and Select Qualifications – that can help taxpayers find a tax pro of high standards.
The IRS.gov website also has a dedicated page offering guidance on choosing a tax professional, including tips on choosing a reputable preparer. The tips help avoid unethical preparers.
Free tax preparation
For those who do not want to spend money on hiring a tax pro, the IRS offers free online filing options. Volunteer Income Tax Assistance (VITA) or Tax Counseling for the Elderly (TCE) sites are an alternative for eligible individuals and families to get free help with preparing their tax return. These sites have IRS-certified volunteers. The free service of the volunteers is available to taxpayers who earn $67,000 or less. TCE sites, meanwhile, offer priority free tax assistance to people 60 years or older. To find the closest free tax help site, use the VITA Locator Tool or call 800-906-9887.
Tips for choosing a tax return preparer
Look for a preparer who’s available year-round. This is because questions may come up about a tax return after the filing season ends.
The Better Business Bureau website is a handy tool to research the antecedents of the preparers where one can also check the 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 check on IRS.gov and search for “verify enrolled agent status” or check the IRS Directory of Federal Tax Return Preparers.
It would be prudent to discuss service fees upfront. This would help taxpayers 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 accounts. A tip: Do not fall for promises to get larger refunds than competitors.
It would be safe to find an authorized IRS e-file provider who are qualified to prepare, transmit and process e-filed returns.
How soon will refuds come?
Electronic filing and direct deposit option lead to faster refunds, sometimes within 21 days.
Proper documentation is a necessity, not an inconvenience. Provide all records and receipts. Trustworthy preparers often require proper documentation and ask questions to determine the total income, deductions, tax credits and other relevant details. Beware a preparer who e-files a tax return using a pay stub instead of a Form W-2. This goes against IRS e-file rules.
It makes better sense to understand the preparer’s credentials and qualifications. Attorneys, CPAs and enrolled agents can represent any client before the IRS in any situation. But annual Filing Season Program participants may represent taxpayers only in limited situations.
It's foolhardy to sign a blank or incomplete return. This is because the taxpayer is responsible for filing a complete and correct tax return.
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