IRS Warns Taxpayers to Choose Tax Preparers Carefully to Avoid Fraud and Identity Theft

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The Internal Revenue Service (IRS) is urging taxpayers to exercise caution when selecting tax professionals, warning that while most preparers are reputable, some engage in fraud, identity theft, and other scams. The agency emphasizes that taxpayers remain legally responsible for their tax returns, even if prepared by someone else.

IRS Resources for Selecting a Tax Professional

To help taxpayers make informed choices, the IRS offers several tools, including:

• The Directory of Federal Tax Return Preparers with Credentials and Select Qualifications, which lists preparers who meet high professional standards.
• A dedicated page on IRS.gov with guidance on choosing a reputable preparer, avoiding unethical ones, and understanding different preparer qualifications.

Free Tax Preparation Services

The IRS provides free electronic filing options and tax assistance through its Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs. These services are available to qualifying individuals, including those earning $67,000 or less and seniors aged 60 and older. Taxpayers can find free tax help using the VITA Locator Tool or by calling 800-906-9887.

Red Flags When Choosing a Tax Preparer

Taxpayers should be aware of warning signs that indicate potential fraud, including:

• “Ghost” preparers who refuse to sign tax returns. IRS regulations require paid preparers to sign returns they prepare. Unscrupulous individuals may prepare returns promising large refunds or charge fees based on refund amounts.
• Preparers without a valid Preparer Tax Identification Number (PTIN). Anyone paid to prepare federal tax returns must have a valid PTIN and must sign the tax return they prepare.

Tips for Choosing a Tax Professional

The IRS advises taxpayers to consider the following when selecting a preparer:

• Availability year-round. Some questions may arise after tax season, so choosing a preparer who is available year-round can be beneficial.
• Check credentials and history. Taxpayers should review a preparer’s background through the Better Business Bureau, State Board of Accountancy (for CPAs), State Bar Association (for attorneys), and the IRS Directory of Federal Tax Return Preparers for enrolled agents.
• Discuss service fees upfront. Avoid preparers who base fees on refund amounts or request refunds to be deposited into their accounts.
• Find an authorized IRS e-file provider. Electronic filing with direct deposit often results in faster refunds.
• Provide accurate records and receipts. Trustworthy preparers request documentation to properly determine income, deductions, and tax credits. Preparers who use a pay stub instead of a Form W-2 violate IRS e-file rules.
• Understand qualifications. Attorneys, CPAs, and enrolled agents can represent clients before the IRS in any case, while Annual Filing Season Program participants have limited representation rights.
• Never sign a blank or incomplete return. Taxpayers should review their returns carefully before signing and ensure refunds are deposited into their own accounts.

The IRS encourages taxpayers to take these precautions to protect themselves from fraud and financial harm as tax season approaches.

This article, "IRS Warns Taxpayers to Choose Tax Preparers Carefully to Avoid Fraud and Identity Theft" was first published on Small Business Trends