Taxpayers beware before signing and filing your tax return.
"Before you sign your tax return, or give authorization for your preparer to electronically submit your return, ask them to explain the return – line by line," said Donna Gale Cothran, franchise owner and enrolled agent of H&R Block, Minden. "Make sure you understand the return and agree with every part. If the Internal Revenue Service chooses to audit your return, they are auditing you, the tax payer, not the tax preparer."
According to the IRS, taxpayers who decide they need assistance when preparing a tax return should choose a tax preparer with care and caution. Even if a return was prepared by an outside individual or firm, taxpayers should remember that they are legally responsible for what they file with the IRS.
Taxpayers should beware of fraudulent preparers by following advice from the Internal Revenue Service website. Every paid preparer needs to have a Preparer Tax Identification Number (PTIN) and enter it on the returns he or she prepares.
Tips when choosing a return preparer include the following:
Be cautious of tax preparers who claim they can obtain larger refunds than other preparers.
Avoid preparers who base their fee on a percentage of the refund. Use a reputable tax professional who signs the tax return and provides a copy.
Consider whether the individual or firm will be around to answer questions about the preparation of the tax return months, or even years, after the return has been filed.
Check the person's credentials. Only attorneys, certified public accountants (CPAs) and enrolled agents can represent taxpayers 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.
Find out if the preparer is affiliated with a professional organization that provides its members with continuing education and resources and holds them to a code of ethics.
According to IRS.gov, reputable preparers will ask to see receipts and ask multiple questions to determine whether expenses, deductions and other items qualify. By doing so, they are trying to help their clients avoid penalties, interest or additional taxes that could result from an IRS examination.
Return preparer fraud involves the preparation and filing of false income tax returns by preparers who claim inflated personal or business expenses, false deductions, unallowable credits or excessive exemptions on returns prepared for their clients.
Preparers may, for example, manipulate income figures to fraudulently obtain tax credits, such as the Earned Income Tax Credit.
In some situations, the client, or taxpayer, may not even know of the false expenses, deductions, exemptions and/or credits shown on his or her tax return.
However, when the IRS detects a fraudulent return, the taxpayer — not the return preparer — must pay the additional taxes and interest and may be subject to penalties.
Even if someone else prepares a tax return, the taxpayer is ultimately responsible for all the information on the return. For that reason, taxpayers should never sign a blank tax form. They should also review the return before signing it and ask questions on entries they don't understand.