Having a pro do your taxes? Don't be scammed

Two weeks ago, the government filed suit to stop a St. Louis CPA and his son from preparing federal tax returns for others. Prosecutors claim the two men were responsible for thousands of fraudulent tax returns that may have cost the U.S. Treasury as much as $29.5 million since 2004.

In its news release about the case, the Justice Department says co-workers referred to one of the men as “the magician” because “numbers on tax returns co-workers prepare are ‘magically’ different after he reviews them.”

“If these preparers play fast and loose with your figures and come up with phony numbers, you are still responsible for the tax due,” says Kenneth Hines, Special Agent in Charge at the Seattle IRS field office. That means you could be hit with penalties and interest.

Right way to choose a tax preparer
You need to be careful when trusting your financial well-being to someone else – as careful as you’d be in selecting other professionals, such as a doctor or lawyer.

Avoid any company that promises bigger returns than the competition, asks you to sign a blank return, or bases its fee on the size of your return.

“That’s an incentive for them to cheat,” warns IRS Special Agent Hines. “And who is left holding the bag at the end of the day? It’s the taxpayer who is lured into this.”

Take the time to find a preparer who is honest, qualified to do the job, and who provides quality customer service. Here’s how to start:

• Ask around. Get referrals from friends and family who used a tax professional. Check the BBB’s free Reliability Report on tax preparation services at www.bbb.org.
• Look for credentials. Is the preparer affiliated with a professional organization that has a code of ethics and provides continuing education and resources to its members? Only attorneys, certified public accountants, and enrolled agents can represent you before the IRS in all matters including audits, collection, and appeals. Other return preparers may only represent taxpayers for audits of returns they actually prepared.
• Will they be there for you? Many tax preparation services only set up shop for the months leading up to April 15. If the IRS questions your return or decides to conduct an audit, you will need to contact your tax preparer throughout the year. Will that be possible?
• Set up a meeting. You should interview a potential preparation service to see how they operate. Ask lots of questions. Who will actually do you return? Will you be charged if you call with a question? How long will it take to have the return done? Do a “gut” check to see if you feel comfortable with the firm and the person handling your return. If not, interview someone else.
• How do they charge? Make sure you understand how much it is going to cost for the service (the preparer should be able to give you a rough estimate), how those fees will be affected if the preparation is more complicated and time consuming than expected, and whether the tax preparer will represent you if there’s an audit.

Links

• Advice for Choosing a Tax Return Preparer
• Tax Return Preparer Fraud

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