How Tax Preparers Can Get You in Trouble With the IRS, Special Agent Says
Not choosing a tax professional carefully can leave you with more problems.
Tax season is often a very stressful time for millions throughout the U.S. Restrictive rules and changing codes can make filing taxes confusing for anyone, which is why so many of us choose outside help instead of trying to do things ourselves. But don't assume you're in the clear just because you have a professional preparing your return. In fact, a special agent for the Internal Revenue Service (IRS) is now warning taxpayers seeking help this year to be extra careful about who they pick. Read on to find out how tax preparers can get you in trouble with the IRS.
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Most people use tax preparers every year.
Taxpayers typically seek outside help during the tax season, according to data. For the 2022 filing season, the IRS reported that more than 85 million electronically-filed returns were received from tax professionals. In comparison, around 67 million e-filed returns were self-prepared last year.
"Taxes can be complicated, and sometimes it makes sense to use a professional," Robert Farrington, founder of The College Investor, previously told Best Life. "The cost of using one could significantly outweigh any future issues. Plus, it could take a lot of time off your hands!"
But in some situations, a tax preparer can do more harm than good.
An IRS special agent is advising taxpayers to choose carefully.
If you're looking for someone to prepare your tax return, there are many options for you to choose from. From certified public accountants (CPA) to enrolled agents and attorneys, several different types of tax preparers exist, according to the IRS.
But no matter which avenue you go down, whoever you pick is going to have a significant amount of access into your life.
"You trust him or her with your most personal information," the agency explains on its website. "They know about your marriage, your income, your children and your social security numbers—the details of your financial life."
With that in mind, IRS special agent Brian Watson is now advising taxpayers to think very carefully about who they're letting file their returns.
"Go to somebody you trust," Watson said in a Feb. 22 interview with CBS-affiliate KOLD in Tucson, Arizona. "Choose a return preparer the same way you would choose a doctor, a dentist, a plumber, or a wedding photographer."
Taxpayers should do their homework before trusting anyone with their personal tax information, according to the IRS Taxpayer Advocate. This includes checking the preparer's qualifications and history, as well as asking the preparer about their fees and asking around to find out if anyone else has used them.
"Choose any return preparer wisely. Always inquire about their education and training," the IRS advises.
If you're not careful, you could end up with a scammer.
Different tax return preparers may have different levels of skills, education, and expertise—even when it comes to CPAs, enrolled agents, or attorneys. But they don't technically need to have a professional credential, according to the IRS.
"Anyone can be a paid tax return preparer as long as they have an IRS Preparer Tax Identification Number (PTIN)," the agency explains on its website.
This means you might inadvertently end up with a scammer. In fact, the IRS says tax return preparer fraud is a common tax scam.
"If something sounds too good to be true, it probably is," Watson told KOLD. "The biggest thing we are seeing scam related are paid return preparers putting a false business on people's tax return."
As Watson explained in a separate interview with Arizona Family, a fake business makes it look like there is a big financial loss on your return, which in turn offsets your income and gets you a bigger refund.
"You're happy, you think until you get that letter later in the year when the IRS or the state of Arizona is asking you to substantiate that business," he warned, noting that that's he's seen many different kinds of fake businesses on tax returns, from landscaping to carpet cleaning. "We go out as special agents and interview these people and we'll ask, 'Did you create this business?' And they'll say, 'No. I've never heard of it.'"
You're responsible for what is on your return.
Even if you didn't know you were working with a scam tax preparer, you could still be on the hook with the IRS for their fraud.
"[The unscrupulous tax preparers] disappear when tax season is over, and you're the one who ends up having to pay the penalties and the extra tax that you owe," Watson told Arizona Family.
The IRS Taxpayer Advocate says a tell-tale sign for this scam is a preparer telling you they can get you a larger refund than other preparers. "Remember, even if your preparer completes your tax return, you are still responsible for its accuracy," they said. "Most preparers are trustworthy and provide good service, but if you choose one who is not honest or is not properly trained, you could pay the consequences."
To avoid becoming a victim, Watson advises taxpayers to take extra precautions when having their returns prepared by a professional. "Go through the return with them line by line, page by page, and make sure you know what is on that return because you are responsible for everything on that return," he told KOLD.
A good preparer will make sure you have the option to do this, Watson added to Arizona Family. "If there are deductions you don't recognize, or even worse a business you don't own, you need to amend that return and go to a new tax return preparer," he said.
Best Life offers the most up-to-date financial information from top experts and the latest news and research, but our content is not meant to be a substitute for professional guidance. When it comes to the money you're spending, saving, or investing, always consult your financial advisor directly.