In two letters this week (IR-2017-23
) the IRS warned taxpayers about inflated refunds and tax preparer fraud.
Some tax preparers promise excessive refunds. This issue is part of the "Dirty Dozen" tax schemes highlighted each year by the IRS.
IRS Commissioner John Koskinen urged taxpayers to be aware of these excessive claims. He stated, "Exercise caution when a return preparer promises an extremely large refund or one based on credits or benefits you have never been able to claim before. If it sounds too good to be true, it probably is."
There are several specific strategies that a preparer may use improperly. These may include falsely claiming Social Security benefits, educational credits or the earned income tax credit (EITC).
Some preparers also have wrongly suggested that you may file a return and report zero wages. Another improper strategy is to claim that there are secret government accounts for U.S. citizens and that by filing IRS Form 1099-OID you can obtain a refund from your secret account.
All of these ideas have been used to obtain excessive refunds, but many taxpayer fraudsters have been discovered by the IRS and forced to repay an appropriate amount.
The second IRS letter urges taxpayers to understand how to select a good tax preparer. Most tax preparers are reputable and honest, but it is helpful to know methods that enable you to select a good preparer.
Koskinen noted, "Choose your tax return preparer carefully because you entrust them with your private financial information that needs to be protected. Most preparers provide high-quality service but we run across cases each year where unscrupulous preparers steal from their clients and misfile their taxes."
The IRS offers several tips for selecting a good tax preparer.
1. Preparer Tax Identification Number (PTIN)
– Tax preparers are required to register with the IRS. They receive a PTIN and it must be included on any tax return.
2. Professional Credential
– A tax preparer may be a CPA, an attorney or an enrolled agent. These are all appropriate certifications for a tax preparer. Many of these persons will also be members of a professional association.
– The preparer should share his or her qualifications with you. There also is an IRS Directory of Federal Tax Return Preparers with Credentials and Select Qualifications. It is available on www.irs.gov
4. Better Business Bureau
– Many tax preparers are listed on this directory or through another agency. CPAs will be members of the State Board of Accountancy. Attorneys will be members of their State Bar Association. Finally, Enrolled Agents are listed on www.irs.gov
– Koskinen explains that eFiling is the safest and most accurate method. Nearly all tax preparers offer an eFiling service.
6. Audit Representation
– If you have a dispute with the IRS, an attorney, CPA or Enrolled Agent may represent you before the agency.
7. Signing Returns
– You should review your return before signing. Do not sign a blank return. Your tax refund should be directed to your bank account or your personal address.