Having someone else file your taxes? Choose wisely, IRS says
Carefully choosing a tax preparation service can save you from becoming a target of the Internal Revenue Service’s Criminal Investigations Division, which has a conviction rate better than 90%, among the highest in federal law enforcement, the agency says.
Almost 60% of those convicted of tax fraud are sentenced to prison, with sentences averaging 17 months, according to the U.S. Sentencing Commission.
Because taxpayers are ultimately responsible for correctly paying what’s owed, regardless of who prepares the returns, they should take precautions to ensure whoever they use are qualified and ethical, and to provide all the information needed.
Taxpayers must document and disclose all their taxable income for the year, said Stephen Kirkland, a certified public accountant who serves as an expert witness in tax court.
“The Internal Revenue Service actively looks for unreported income,” Kirkland wrote in an email to the Ledger-Enquirer.
“It is critical for each individual to keep records showing the sources and nature of all of their income. The same requirement applies to deductions. If you don’t have documentation to support the deductions you claim, the deductions may be disallowed during an audit.”
The IRS advises that besides training and experience, professional tax return preparers should have a “preparer tax identification number” or PTIN that is noted on the tax forms they sign.
The preparer should also be available months or years after the return is filed, to answer any questions regarding it.
“The third-party authorization checkbox on IRS tax forms gives the designated party the authority to receive and inspect returns and return information and to discuss the processing of your current tax return, including the status of refunds for one year from the original due date of your return,” the IRS says.
The agency offers additional tips on picking a preparation service:
- Beware of preparers claiming they can get larger refunds.
- Avoid any who base fees on a percentage of the refund, or want to deposit your refund to their accounts.
- Make sure the preparer signs the return and gives you a copy of it, as required.
- Read over the return yourself before it is filed.
- Never sign a blank tax form.
- Check the preparer’s credentials, as only attorneys, certified public accountants and enrolled agents can represent taxpayers before the IRS in audits, collections and appeals.
“Enrolled agents,” licensed by the IRS, pass a three-part exam to show proficiency in federal tax planning and complete 72 hours of continuing education every three years to maintain their credentials.
The IRS offers a directory of qualified federal tax return preparers at irs.gov, along with other tips and tools.
The agency also provides online forms for filing complaints about a tax preparer for potential misconduct such as:
- Filing tax forms without your knowledge or consent.
- Altering your tax documents.
- Changing your filing status for a larger refund.
- Claiming false exemptions.
- Inflating or reducing income.
- Redirecting your refund elsewhere.
The taxpayer should use IRS Complaint Form 14157, make copies of supporting documents to supplement the form and then send them the following ways:
FAX: 855-889-7957
MAIL: Internal Revenue Service, Attn: Return Preparer Office, 401 W. Peachtree Street NW, Mail Stop 421-D, Atlanta, GA 30308
This story was originally published September 22, 2022 at 12:47 PM.