Tax Preparer Red Flags

Tax returns. Let’s be honest, most people cringe at the thought of dealing with them. There can be a lot of emotions when filing your taxes…frustration, anger, and anxiety. These reactions can come when gathering all the necessary documents, worrying that something will be missed, or not knowing how much might be owed (and having no savings to cover it). With all this stress, the ONE thing that will keep your sanity is making sure you trust your tax professional. Keep reading to learn the red flags to watch for so you can know who to avoid and feel more comfortable in who you hire.

The preparer does not have a valid Preparer Tax Identification Number (PTIN)

The Internal Revenue Service requires all that prepare or assist in preparing federal tax returns to have a valid PTIN. If they do not have a valid PTIN, they are not allowed to prepare the return.

The preparer may be reporting questionable items if…

They promise a big refund

If your tax situation has changed, you might be expecting a larger refund. A tax preparer can certainly share about the possibility of a larger refund but should never guarantee one before actually getting to work on it. They may be able to claim deductions you aren’t eligible for or make changes to the income to receive certain tax credits…both of which can lead to big problems rather than a big refund!

Their fees are based on a percentage of your refund

As mentioned above, they can make changes on your return to “guarantee” a larger refund which also brings them a larger paycheck.

They ask you to sign a blank return

“Read it before you sign it.” This simple rule most definitely applies to your tax return! Never sign a return until it is completed. You should always be aware of the numbers being reported and be given the opportunity the look over and conclude that everything is correct.

A few other noteworthy actions…

The tax professional must return all original records of the client, upon request.

The tax professional cannot have refunds sent to them directly.

The tax professional cannot work with a couple that is divorcing, due to conflict of interest, unless they have written permission from both parties

The tax professional may not speak to another person about a taxpayer’s situation without written consent. This means that if your sister tells you that their tax pro mentioned working on your return, they violated the required confidentiality.

There are several do’s and don’ts, as well as, cans and cannots that tax professionals must abide by. Tax professionals are required, by the IRS, to follow a certain code of federal regulations. If you are curious about what these are, this code can be found at https://www.irs.gov/pub/irs-pdf/pcir230.pdf